ASIC takes Mercer Super to court for failing to report serious member service issues

Mercer Super, one of Australia’s largest superannuation funds, has been hauled into court for allegedly failing to alert the corporate regulator about investigations into serious member services issues which included making incorrect insurance premium refunds for dead members.

The Australian Securities and Investments Commission (ASIC) is further alleging that Mercer Super provided false or misleading information when reports of these incidents were eventually filed.

ASIC today launched proceedings in the Federal Court following an investigation of Mercer Super’s activities between October 2021 and September 2024.

The corporate regulator alleges that Mercer Super had inadequate systems in place to comply with the reportable situations regime, which requires Australian financial services licensees to promptly report ongoing investigations into significant breaches of their core obligations.

Mercer Super is alleged to have failed to report seven investigations at all, while another investigation was said to have been reported more than a year late.

Apart from insurance premiums not being refunded correctly after members had died, ASIC says the investigations by Mercer Super also involved member accounts that were not being created with default insurance and updates to member information that were not being processed by the trustee.

ASIC also alleges Mercer Super provided false or misleading information in reports to ASIC, which understated the number of members who were impacted.

ASIC deputy chair Sarah Court says the case against Mercer Super is the latest in a series of actions the regulator has taken to drive change in the way trustees serve their customers.

“We allege a pattern of longstanding and systemic failure by Mercer Super to comply with the law,” says Court.

“These aren’t just technical breaches. Allowing investigations into significant issues to drag on for months or, in some cases, over a year without reporting them to ASIC demonstrates a lack of care for customers and can put more at risk.”

Mercer Super is the seventh largest super fund in Australia with more than 950,000 members and $70 billion in assets under management.

“As one of Australia’s largest super funds, Mercer Super should have had adequate systems in place to manage and monitor critical issues like this,” says Court.

“The reportable situation regime is in place to ensure ASIC can identify misconduct early and take action to protect Australians. Customers expect their super funds to abide by the law.”

It’s not the first time Mercer Super has been in the sights of ASIC after the regulator secured an $11.3 million penalty against the superannuation fund last year in a landmark Australian greenwashing case.

Mercer Super was fined for making misleading statements about the sustainable nature and characteristics of some of its superannuation investment options.

ASIC says member services failures in the superannuation sector are among its enforcement priorities this year.

Over the past 12 months, ASIC has sued AustralianSuper and Cbus over alleged failures in handling death benefit and insurance claims.

ASIC has also issued 34 death benefit claims recommendations to super trustees and flagged its next phase of work focusing on how trustees respond to customer complaints.

While ASIC is reviewing the reportable situation regime to make compliance simpler for licensees, the regulator says Mercer Super’s alleged conduct “falls well below what ASIC expects of a trustee of its size and market position”.

“There is work under way to review and simplify the regime but that doesn’t mean trustees can avoid their obligations,” says Court.

“Mercer Super’s alleged failure to meet those obligations over several years is why we’re taking action.”

ASIC is seeking declarations and penalties from the court.

In acknowledging ASIC's legal action today, Mercer Super says it had cooperated with ASIC during its investigation and is currently reviewing the claim.

"We note that ASIC has expressly stated in its pleading that it does not allege that (Mercer Super) set out to deliberately mislead ASIC in respect of the matters set out in the claim," the company says.