Wednesday 7 October 2020
Super funds benefit with strong protective whistleblower policies
The Australian Government’s reforms to strengthen the whistleblower protection regime for superannuation funds have been in place for more than a year. Jane Eccleston, ASIC Superannuation Senior Executive Leader, reminds trustees of their obligations to support and protect whistleblowers and implement a whistleblower policy.
Whistleblowers play an important role in calling out misconduct in the super sector. Whistleblowers help uncover wrongdoing that may not otherwise be detected.
We know that many whistleblowers start by raising their concerns internally. They alert the business to changes needed to comply with the law and improve performance.
Superannuation trustees can benefit from these insights when they make it as easy as possible for their own people to come forward when they observe or experience wrongdoing. Robust arrangements to handle reports from whistleblowers and transparent whistleblower policies are essential features for good risk management and corporate governance.
The Australian Securities and Investments Commission (ASIC) values super industry insiders who report potential breaches of the law to ASIC. Whistleblowers give us the benefit of their insights and help us address and prevent harm to consumers.
What protections are available to whistleblowers?
The legal rights and protections for whistleblowers apply to people both inside and outside a super trustee who may observe or be affected by misconduct, even if these people wish to remain anonymous.
For a super fund, whistleblowers protected under the law include current and former employees, officers and suppliers, as well as the trustee, custodians and investment managers and their employees. The spouses, relatives and dependants of these people can access the protections too.
Whistleblowers have the right to confidentiality, and they are protected from reprisals and legal action related to reporting their concerns. However, there is no statutory immunity for whistleblowers in relation to their own misconduct.
In certain limited circumstances, whistleblowers are also protected when they report their concerns to a journalist or member of Parliament.
There are criminal offences and civil penalties for causing or threatening to cause detriment to a whistleblower or breaching a whistleblower's confidentiality, including during an investigation into the whistleblower's concerns. A whistleblower can seek compensation and other remedies from their employers if they suffer loss, damage or injury for reporting misconduct.
These protections are available to whistleblowers from when they report their concerns to ASIC or the Australian Prudential Regulation Authority (APRA). The protections are also available from when a whistleblower reports within a super fund to:
- an officer of the trustee
- the fund’s internal or external auditor (including a member of an audit team conducting an audit) or actuary
- an individual who is the trustee of the fund
- a director of a corporate trustee of the fund, and
- a person authorised by the trustee to receive whistleblower reports.
It is important for people in these roles to understand their obligations and handle whistleblower reports in line with the requirements of the regime.
What should trustees be doing?
It is important for super trustees to put arrangements in place to handle reports from whistleblowers.
Under the law, corporate trustees of registrable superannuation entities are required to have a whistleblower policy. It needs to contain information on:
- the protections available to whistleblowers, including protections under the law
- the staff members a whistleblower can make a report to and how they can report their concerns
- how the trustee will support whistleblowers and protect them
- how the trustee will handle and investigate whistleblower reports
- how the trustee will ensure fair treatment of employees who are the subject of whistleblower reports, and
- how the policy is to be made available to officers and employees of the trustee.
But in order for whistleblower arrangements to contribute meaningfully to a super fund’s risk management, super trustees need steps beyond having a policy. To maximise the potential benefit of whistleblower disclosures, super trustees need to create a positive and open environment where potential whistleblowers are confident to come forward to make a disclosure.
ASIC guidance for both funds and whistleblowers
ASIC is responsible for enforcing the corporate sector whistleblower protection regime, including where a whistleblower may suffer detriment for alleging breaches of laws outside of ASIC’s regulatory responsibilities.
ASIC released Regulatory Guide 270 Whistleblower policies (RG 270) in November 2019 to assist companies and super trustees to establish and implement a whistleblower policy. RG 270 provides guidance on the mandatory content required in a policy and good practice measures for implementing and maintaining a policy. This includes suggested roles and responsibilities for handling whistleblower disclosures and risk management tools for protecting whistleblowers from detriment.
Given people inside and outside a super fund can qualify for protection as a whistleblower, RG 270 recommends trustees make their whistleblower policies available on their external website.
On 30 June 2020, ASIC released further guidance to assist companies and company officers—including officers of super trustees—understand and comply with their obligations. See Information Sheet 247 Company officer obligations under the whistleblower protection provisions for more information.
These information sheets provide guidance on:
- obtaining consent from whistleblowers to disclose their identity if required for investigations
- reasonable steps to reduce the risk a whistleblower will be identified
- the arrangements for staff who may correspond with whistleblowers on behalf of company officers, and
- how to address any employment issues involving a whistleblower while also handling their report.
What is ASIC doing to help whistleblower and trustees?
In 2019-20, ASIC assessed close to 650 reports from whistleblowers. Approximately 25 per cent of whistleblower reports raised concerns of potential financial services and markets misconduct.
Whistleblowers in the super sector alerted us to misconduct by trustees. This included poor investment advice, inappropriate fees and misleading members.
ASIC is making a number of inquiries into concerns raised with us by whistleblowers across our regulatory responsibilities. We are inquiring into alleged breaches of the whistleblower protections and failures to implement a compliant whistleblower policy.
In 2020-21, ASIC is beginning to survey whistleblower policies from a sample of public companies, large proprietary companies and super trustees. ASIC will reach out to a limited number of trustees to participate voluntarily.
ASIC’s review will focus on compliance with the legal requirements and the extent to which these companies are implementing good practices. It will also focus on the nature and content of whistleblower policies to better understand how companies and trustees are responding to the obligations.
This will help ASIC to understand how companies and trustees handle whistleblowers and if further guidance is required.
An effective approach to whistleblowing is good for your business, the sector, and, ultimately, your members.
We remind trustees to review ASIC’s guidance in Regulatory Guide 270 Whistleblower Policies (RG 270) when implementing their whistleblower policy and to visit asic.gov.au/whistleblowing for more information on the whistleblower protection regime.
This article was first published on ASFA’s Superfunds. ASFA members can log in to the new Superfunds website to view the article.