First State Super has told Financial Standard it will not be pursuing legal proceedings against the 'goodwill hacker' who exposed a security flaw in its system, with the two parties to instead resolve any issues together.

Michael Dwyer, chief executive of First State Super (FSS), told Financial Standard the super fund will not be continuing its legal case against Patrick Webster.

"We have made an offer to Mr Webster to work jointly together towards resolving the issues, to which he has agreed. We are yet to have the meeting," said Dwyer.

Patrick Webster, FSS member, ex-NSW police employee and IT security specialist raised the alarm last month when he emailed FSS administrator, Pillar, on September 22 and detailed how he gained unauthorised access to the statements of around 568 other members of the Fund.

Webster said that initially he was thanked for highlighting the issue of member numbers being visible in URL's, allowing individuals to simply alter their member numbers to access fellow Fund member accounts.

"Naturally I find this extremely concerning so contacted you today [Sept 22] (I found this around 9pm last night). All the data I obtained has been destroyed / deleted but validated my concerns," said Webster in the email.

"Ideally the Pillar website should generate some kind of hash [provides example] instead of a direct object reference."

Following this email, Webster received legal notification from FSS lawyers, MinterEllison, stating that while his actions were "an attempt to show that it is possible for a wrongdoer to obtain unauthroised access to Pillar's systems, your actions themselves may be considered a breach of section 308H of the Crimes Act 1900 (NSW) and section 478.1 of the Criminal Code Act 1995 (Cth)."

"You should be aware that due to the serious nature of your actions, this matter has been reported to the NSW Police," read the letter.

Webster was requested to destroy and delete all data and records that he gained unauthorised access to and was told he would no longer have any access to the members section of the Fund's website.

Dwyer said the Fund still wants to ensure that all records have been deleted and that both FSS and Webster are comfortable with the outcome and that the meeting is to discuss his findings.

Dwyer confirmed there will be no more legal proceedings and that they "will be having a discussion and working it out between the two of us."

FSS, which has over 770,000 members and some $30 billion in funds under management after merging with Health Super in June, notified members of the security breach on October 7 with the option to change their existing member number and establish a new account.

The letter, obtained by Financial Standard, told members of the security breach and assured them that while it was not a targeted attack on their personal account, immediate action was taken and "permanent changes to our processes to prevent this issue occurring again have been made."

Dwyer confirmed the issue had been rectified immediately after Webster's notification and that member response had been fairly positive.

"Largely it has been business as usual, but there have been a small number of members who did contact us after receiving the letter."