Ms S, a recent migrant from Petrograd, began work as a cleaner at a local high school secondary school. A condition of her employment was that she must join the Education Superannuation Fund. When offered the position the principal at the school handed her a document entitled: "All you need to know about the "Education Superannuation Fund". It was a single A4 page that only listed the name of the fund, and a reference to the fund's website "for all other questions". When Ms S went to the website, she was overwhelmed by the information contained on the site: a 300- page Product Disclosure Statement, and a 200-page Financial Services Guide. Ms S, who could not speak or read much English, looked for her native language amongst the list of advisors in the "Contact Us for Help" tab on the website, but couldn't find anything. So, Ms S just shook her head, and ticked a box which said: "I have, read, understood all the information contained in this website." Thus, she did not realise that there was a tab with the heading "Legal Notices" that included a drop-down menu containing exemption clauses, and information about the internal dispute resolution services. She later received an email with an attached document called "Confirmation of our Advice to you."

(a) Has Education Super Fund complied with its disclosure obligations according to the relevant legislation and common law?

For reference:

Superannuation trustee

A super trustee is a person whose profession, business or employment is or includes acting as a trustee of a superannuation entity and investing money on behalf of beneficiaries of the superannuation entity.

Under general law, the fiduciary duty of a super trustee is to act in the best interests of the fund member.

Trustee duties regarding other people's money

The general law fiduciary duties are added to by the Superannuation Industry (Superannuation) Act 1993 (Cth)Links to an external site. ("SIS Act" or the "Act"). The Act sets out covenants (rules), which must be included in the rules of each superannuation entity (the fund) (s. 52). If the covenants are not in the rules already, they must cover these compulsory statutory covenants.

Trustee duties regarding regarding other people's moneycovenant

The general covenants include the following:

1. The trustee must act honestly in all matters concerning the fund (s. 52(2)(a)).
2. Exercise the care, skill and diligence as an ordinary prudent person (s. 52(2)(b)).
3. Act in the best interests of the beneficiaries (s. 52(2)(c)).
4. Give priority to the beneficiariesput the interests of the beneficiaries ahead of the interests of the trustee (s. 52(2)(d)).
5. Act fairly in dealing with classes of beneficiaries (s. 52(2)(e), (f)).
6. Keep the money and assets of the entity separate from any money and assets of the trustee, employer or sponsor of the entity (s. 52(2)(g)).
7. Not contract or do anything that would prevent the trustee from performing its functions and powers (s. 52(2)(h)).
8. Formulate, review regularly and give effect to a strategy for the prudential management of any reserves consistent with the entity's investment strategies and its capacity to discharge its liabilities (s. 52(2)(i)).
9. Allow a beneficiary of the entity access to information or documents of the entity (s. 52(2)(j)).

The trustee's investment strategy regarding other people's moneyInvestment covenant

Superannuation monies must be invested prudently. There must be diversification and liquidity. The covenants of the trustee include:

1. An investment strategy having regard to:
   • the risk
   • the composition of the investments covered by the strategy
   • the liquidity of the investments
   • whether reliable valuation information is available
   • existing and prospective liabilities
   • the expected tax consequences, and costs.
2. To exercise due diligence in developing, offering and reviewing regularly each investment option.
3. To ensure the investment options offered to each beneficiary allow adequate diversification (s. 52(6)).

The trustee's insurance covenants regarding other people's moneyInsurance covenant

The covenants of the trustee include the following:

1. An insurance strategy for the benefit of beneficiaries, including:
   • the kinds of insurance for the beneficiaries
   • the level of insurance for the benefit of beneficiaries
   • the basis for the decision to take out that insurance
   • the method by which the insurer is to be determined.
2. To consider the costs of that insurance to the beneficiaries.
3. To only take out insurance which does not erode the retirement income of beneficiaries.
4. To pursue any insurance claims if they have a reasonable prospect of success (s. 52(7)).

Trustee's risk covenants regarding other people's moneyRisk covenants

The trustee must:

1. have a risk management strategy that relates to the activities of the trustee, and the risks that arise in operating the entity
2. maintain and manageunder prudential standardsfinancial resources (capital of the trustee, a reserve of the entity) to cover the operational risk that relates to the entity (s. 52(8)).

Australian Securities and Investments Commission (ASIC)

ASIC regulates those who provide financial services, which includes providing financial product advice. Complaints can be lodged with ASIC. Financial products are regulated under the Corporations Act 2001 (Cth), which includes super, insurance and financial advice by banks. Bank accounts are not considered financial products.

ASIC ensures that trustees of superannuation funds comply with their obligations regarding the provision of information to fund members during their membership. This includes:

• providing consumer protection in the financial services area (including superannuation)
• monitoring funds' compliance with the Corporations Act 2001 (Cth)
• running MoneySmart, a website to help people make smart choices about their personal finances.