Mercer Super fined $10.3m for reportable situations failures

Mercer Superannuation Australia will pay a $10.3 million penalty after it admitted to breaching the Reportable Situations Regime on several occasions, which the Federal Court found could have had the "potential to have a detrimental effect on members."

ASIC has successfully held Mercer Super to account following its legal action launched last August.

By its own admission, Mercer Super's failures fall into three categories. The first, Mercer Super's failure to have an adequate system in place to identify and report reportable investigations throughout the relevant period, being 1 October 2021 and 30 September 2024.

One key limitation of Mercer's incident system was its governance, risk and compliance (GRC) database, where incidents were recorded, assessed and tracked, lacked the functionality to identify when an investigation commenced or track its duration.

Furthermore, the court found Mercer Super had no adequate definition or description of an "investigation or a reportable investigation" and no process to record and report investigations that continued for more than 30 days.

Secondly, Mercer Super failed to report seven reportable investigations to ASIC at all and reported the eighth matter late.

Justice Button said the incidents "had the potential to have a detrimental effect on members."

The matters included the super fund failing to update some member accounts leading to higher fees and less favourable insurance arrangements, charging insurance premiums after a member's death, and not providing death and permanent disability insurance cover for some eligible members.

Finally, it made misstatements to ASIC by failing to take all reasonable steps to ensure the reports submitted to ASIC in relation to one of those reportable investigations were not materially false or misleading.

ASIC said it "accepts that the misstatements did not result from any deliberate attempt by [Mercer Superannuation Australia] to mislead ASIC". Rather, they reflect the" failure to consider, or properly to consider, the contemporaneous records available to it, including entries in the GRC database, or make other relevant inquiries, prior to lodging the relevant reports with ASIC."

Justice Button said the $10.3 million penalty "presents a sufficient sting to serve the purposes of general and specific deterrence, and reinforces the vital importance of financial services licensees ensuring that the systems they deploy in the provision of those services are designed and operated in a way that connects with integers of the statutory regime under which financial services licensees operate (here, in particular, the Reportable Situations Regime)." Mercer Super will pay ASIC's costs of $1.2 million.

"In addition, the penalty in respect of the third set of contraventions reinforces the need for financial services licensees to design and operate systems that are 'joined up' so that important information is captured and not overlooked when reports are made to ASIC," the judge said.

In response to the judgement, Mercer Super said: "Mercer Super acknowledges and apologises that it fell short of its obligations under the reportable situations regime. The agreed facts submitted to the Federal Court shows these shortcomings were not deliberate and that Mercer Super did not financially benefit from them. There is no allegation of financial or non-financial loss to members in relation to this matter."

"To address the issue, we have made important investments across Mercer Super, putting in place additional personnel, and improving our processes, systems, and technology."

Mercer Super added it will pay the penalty and will not be taken from the super fund or its members.

ASIC chair Sarah Court said the systemic deficiencies and conduct identified were inappropriate for a superannuation trustee of Mercer Super's size and market position.

"These failures undermined a critical safeguard designed to protect consumers and exposed fundamental weaknesses in Mercer Super's systems and processes.

"This was not an isolated oversight. It was a sustained systemic issue that continued for years after the regime was introduced, which is unacceptable for a fund entrusted with $80 billion worth of retirement savings for more than a million members," she said.