The Australian Securities and Investments Commission (ASIC) has put the financial advice sector on notice after finding issues with advisers failing to correctly witness binding death benefit nomination (BDBN) forms for super benefits.
ASIC last Friday said it had become aware of a “widespread practice” among advisers witnessing or having staff members witness client signatures on BDBNs without being in the presence of the signatory.
In other cases, forms had been backdated.
Each of these practices fails to comply with the law and may lead to the nominations being invalid, the corporate regulator warned.
“Improper and unethical practices around binding death nomination forms can lead to very poor consumer outcomes,” ASIC acting chair Peter Kell said.
“Advisers, licensees and their staff who engage in these practices should consider this a final warning.
“Australian financial services licensees (AFSL) have ultimate responsibility for the conduct of their representatives and need to effectively monitor and supervise their representatives.”
Proper execution of BDBN forms is important as the form directs the trustee of the super fund to pay super and insurance benefits in accordance with the account holder’s instructions.
Improper witnessing of the form can render it invalid, resulting in the death benefit nomination being rejected.
The trustee may then choose to exercise its discretion in a manner other than in accordance with the account holder’s nomination, causing delays and uncertainty about the payment of the death benefit.
“AFSLs and advisers have a professional and legal obligation to comply with the law,” ASIC said.
“Taking short cuts which result in important forms being invalidated and thereby jeopardising the account holder’s wishes does not meet the minimum advice and conduct standards expected by ASIC.”
BDBNs are regulated by the Superannuation Industry (Supervision) Act.
