It is impossible to sign and witness binding death benefit nominations (BDBN) electronically under current legislation, according to a law firm.
Mills Oakley financial services partner Lisa-Marie McKechnie said the firm had worked with a large superannuation fund that was going through a significant electronic transformation, but the firm could not devise a way to move to a fully electronic system for BDBNs under the current Superannuation Industry (Supervision) (SIS) Act 1993.
“What I think is missing is really any legislation to say that they can be signed electronically,” McKechnie told selfmanagedsuper.
“I’ve been through this a number of times with trustees and under the existing specific provisions there just is no way of getting around the presence of the actual witnesses because it requires a declaration to state that the person is present.”
She suggested a carve out that allowed for signatures to be witnessed and provided electronically, but said that would not work under the current legislation, which was written in 1993.
However, she warned even if legislation was tweaked to allow for the aforementioned practice, it would still be riddled with danger, which explained why many SMSF trustees were loath to even consider it.
“A binding nomination is such a significant piece in a super fund and a lot of members want the peace of mind that comes with them. So when you open the risk that they can be fraudulently made or forged, they lose the safety that comes with them. So at the moment there’s not a huge [push] from super funds to go there,” she said.
Mills Oakley corporate advisory special counsel Luke Hooper told selfmanagedsuper there were two main issues to consider when drafting amendments to the SIS regulations to address this matter: firstly, could BDBNs be signed and witnessed electronically, and, if so, what protections would be in place for trustees to be able to accept that?
“I think until such time as the latter point can be settled, most trustees may be unwilling to go down the electronic path, even if the technology is available to provide the trustee with the requisite degree of certainty,” Hooper said.
Since there still was no certainty BDBNs were validly made unless the trustee saw two other witnesses acting in the appropriate manner, he suggested technology platforms might provide greater certainty in recording the “fact that all three persons were in the same place at the same time”.
SIS regulations currently stipulate BDBNs must be in writing, signed and dated by the member in the presence of two valid witnesses, and witnesses must ensure they saw the member sign the nomination.
“I think until such time as there is complete certainty, members and trustees would be advised to only sign and witness nominations on paper and accept paper nominations,” Hooper said.
The Australian Securities and Investments Commission (ASIC) put the financial advice sector on notice in January after finding issues with advisers failing to correctly witness BDBN forms for super benefits.
