Case 1:

When it comes to switch requests – timing is of the essence.

Prior to 3.00pm, the member tried to fax an investment switch request to the trustee. He regularly made such requests and knew the trustee’s policy was any requests received before 3.00pm were transacted at that day’s unit price and any requests after 3.00pm, at the following day’s price. This process stopped members from gaming the system by knowing the closing price before transacting. Forward pricing is standard industry best practice.

Shortly before 3.00pm the member phoned the trustee’s call centre staff and explained that he had attempted to fax the switch request several times but was receiving an error message. The member then sent through evidence of his attempts to fax before 3.00pm and the phone call was escalated to a senior staff person within the call centre.

The trustee’s representative decided to accept the switch request as if it had been received by the call centre before the deadline. A trustee representative then phoned the member and confirmed the decision. The trustee’s evidence was the member was most appreciative, but this call was not recorded and the member ‘s evidence was he did not receive the call.

The following day at 8.35am the member sent through a cancellation of the prior day’s switching request. The trustee refused to action this request and the switch proceeded at the unit price applicable the day before. The trustee advised that to cancel a switch, notice must be received the same day and before the 3.00pm deadline.

The trustee submitted that there was no reason to reverse the member’s switch request and to do so would have been a breach of its forward pricing standards. The Tribunal agreed with the trustee and held that it had exercised its discretion and actioned the member’s switch request “as per his wishes and in good faith”. The Tribunal went on to hold that the member cannot insist the trustee “override its switching policies on one day and then use that action against it the next day”. Accordingly, the trustee’s decision to not compensate the member was affirmed.

Case D18-1950

Case 2:

This case concerns the trustee’s decision to not compromise (settle) the complaint of a member who was complaining about higher insurance costs (amongst other matters) as a consequence of a successor fund transfer (SFT).

The member wished to transfer to his self-managed superannuation fund (SMSF) $165,000 but was advised by the trustee he had insufficient funds to complete this transaction while leaving $5000 in his account – the minimum balance under the fund rules. The member alleged he agreed with the trustee to transfer $163,500 whereas the actual amount subsequently transferred was $159,926. Further, the account balance left in the fund was $2424 not $5000.

The member wanted compensation of $6,150 being the difference between the alleged agreed transfer amount and the amount actually rolled over, plus the difference between the minimum balance and his actual balance immediately after the rollover. The trustee refused his request.

The facts were that the member lodged a request to rollover monies on 30 January which was received by the trustee on 3 February. The following day, the trustee telephoned the member to obtain his instructions as there were insufficient funds in the member’s equity investment option to effect the request. The member also had monies in a direct share option so the trustee needed to know whether the member wanted some of those shares sold to permit $165,000 to be transferred. The member did not want any of his direct investments sold and agreed to effect the transfer only from his equity investment option. This conversation was recorded and provided to the Tribunal as evidence that the member understood the account balance went up and down with investment returns and the trustee’s representative had stated “I’ll do as much as I can and leave the direct alone”.

On these facts the Tribunal found no representation was made by the trustee to transfer a specific amount and that the timing of the transfer satisfied the three business days rule under regulation 6.34A of the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations). In this case, the three days started after the trustee had received additional information from the member in the phone call. Further, the Tribunal found, as a matter of fact, the member understood investment returns could be both positive and negative.

The remaining question for consideration by the Tribunal was whether the trustee inappropriately failed to leave a residual balance of $5000 in the member’s account.

According to the trustee’s records, when it decided to transfer the amount of $159,961.88 on 9 February the residual account had a balance over $5000 but negative rates were then applied retrospectively for 8 and 9 February leaving a balance of $2,505.58. On the day of transfer the daily crediting rates for the transfer day and the previous day were unknown. On this basis, the Tribunal was satisfied the trustee had done nothing wrong.

The Tribunal therefore affirmed the trustee’s decision to not compensate the member.

Case D18-1944

Case 3:

Fund business rules are there to be followed!

The decision under review was that of the trustee deciding to not compensate the member for interest and reimbursement of fees caused by the delay in processing his rollover request to his SMSF.

On 19 July the member requested the entire balance of his income stream be transferred to his SMSF. The trustee received this request one week later and the day after this, the trustee contacted the member for further information which he supplied on the same day.

Under regulation 6.33E of the SIS Regulations, the trustee is required to use electronic services to check the name and ABN of the SMSF, and confirm that it is a regulated superannuation fund, and that the member is actually a member of the fund. If the trustee is unable to verify this information electronically it is required to make enquires of the ATO within five business days.

The trustee advised the Tribunal that it had attempted to verify the member’s details through the AUSkey system but was unsuccessful. It then telephoned the member on 4 August which was within the five business days rule. This telephone call between the member and a trustee representative was recorded and supplied to the Tribunal. In summary, the member was being asked to contact the ATO himself, but he was not really following the conversation and the call ended by the trustee hanging up on him. It was acknowledged by the trustee that this was unprofessional. Importantly, the member at this stage, thought the trustee was continuing to process his rollover request, but the trustee did nothing until it received a letter from the member dated 6 September. On 22 September, the trustee wrote to the member asking him to contact the ATO to verify membership details. The member did this and on 3 October advised the trustee.

The trustee was asked by the Tribunal whether it had contacted the ATO as per the regulatory requirements. While the trustee could point to this being in its business rules it was unable to confirm the rules had been followed. On this point, the Tribunal found that, on the balance of probabilities, contact with the ATO was not made by the trustee. If however contact had been made, more than likely it would have resulted in the rollover proceeding within the regulatory timeline.

On 3 October the trustee was able to do all the necessary electronic checks and advised the member the rollover would proceed the next day. However, some further delay occurred and the member’s rollover cheque was not issued until 19 October.

The Tribunal held that these facts were unacceptable. In all the circumstances the rollover should have been completed by 9 August being three business days after the day the trustee could reasonably have contacted the ATO. The Tribunal substituted its own decision which involved compensating the member for the delay pursuant to a detailed formula which included the member providing the trustee with evidence of the rate of return his SMSF made during the relevant period.

Case D18-1942