ASIC v MobiSuper: The Court’s reminder that fund promotions must be done lawfully

FACTUAL background

ZIB was a holder of an Australian Financial Services (‘‘AFS’’) licence under which, MobiSuper as its corporate authorised representative was able to give a financial product advice.  MobiSuper acting under ZIB’s AFS, commenced a business relationship with Tidswell Financial Services for the Fund whereby Tidswell would firstly, provide professional trustee services to MobiSuper and secondly, launch the Fund, and on the other hand, MobiSuper would act as the promoter of the Fund.

On 22 November 2022, MobiSuper started promoting the Fund to the public by creating and operating a marketing website for the Fund, by creating and preparing communication and marketing materials, operating campaigns and providing member on-boarding and retention services. Importantly, MobiSuper was marketing and selling interests in the Fund through telephone calls conducted by the centre customer service operators (‘‘CSOs’’). It was CSOs’ usual practice, among others, to:

• respond to requests for inquiries about superannuation
• obtain or confirm personal details;
• offer to open a Fund account and open one on the consumer’s behalf if they wished;
• require the consumer to agree to join the Fund;
• offer to roll over any superannuation funds held in some or all existing funds into the Fund; and
• determine which Fund insurance the consumer was eligible for.

Additionally, in relation to the telephone advice calls to consumers, MobiSuper provided and instructed CSOs to use telephone scripts created by MobiSuper and approved by ZIB. Such call scripts, included reference to the potential consumer:

• disposing of interests in their existing fund;
• obtaining a beneficial interest in the Fund; and
• acquiring cover by way of Fund insurance.

As a result of high concerns that the personal advice given by MobiSuper (through CSOs) during the phone calls was not provided with the relevant legal protections and had therefore contravened the Corporations Act 2001 and the Australian Securities and Investments Commission Act 2001 (“ASIC Act”), together the “Acts”, the Australian Investment and Securities Commission (‘‘ASIC’’) initiated proceedings against MobiSuper and ZIB. Precisely, sixteen of the telephone advice calls were the subject of pleas in ASIC’s claim, which were then analysed in detailed by the Court.

JUDGMENT

The Court held that during the marketing phone calls, MobiSuper (through the CSOs):

• provided “personal advice” within the meaning of section 766B(3) of the Corporations Act, and such personal advice was not in the best interest of consumers;
• failed to warn consumers of the inaccuracy of the information;
• provided misleading claims that opening an account with Fund and consequently moving their superannuation into the new account would save fees;
• breached sections 946A and 967D of the Corporations Act by failing to provide Statements of Advice; and
• breached section 12DB(1) of the ASIC Act by making false or misleading representations in respect to the price of services.

Additionally, with respect to ZIB, the Court concluded that it failed to:

• ensure that MobiSuper provided efficient, honest and fair services;
• take reasonable steps to ensure that MobiSuper will act in an appropriate manner and follow its obligations; and
• take reasonable precautions regarding MobiSuper’s actions, and this resulted in breach of 961K(2), s 961L and s 912A(1)(a) of the Corporations Act.

As a result of the above, the Court imposed pecuniary penalties of the amount of $125,00 against each MobiSuper and ZIB for their respective contraventions of the abovementioned acts.

Further, it is worth noting that the Court in 2021 held Tidswell Financial Services accountable in terms of failing to adequately monitor MobiSuper‘s activities and failure to comply with Australian Prudential Regulation Authority’s Outsourcing regulations. This ultimately resulted in a cancellation of Tidswell’s Responsible Superannuation Entity Licence and a $50,000 fine.