There is a "widespread" problem with financial advisers cutting corners when clients sign a key superannuation document, the corporate cop has warned, ordering the industry to lift its game.
The Australian Securities and Investments Commission on Friday said many advisers were failing to comply with the law when clients signed a document that sets out who will receive their superannuation and insurance benefits if the client dies.
The shortcuts being taken could lead to the forms being invalid, potentially creating "very poor outcomes" for consumers, acting ASIC chairman Peter Kell warned.
ASIC said some advisers were acting as witnesses on the "death nomination form," as it is known, even though they were not present when the client signed. Other advisers were backdating forms, ASIC said, without providing details on the number of breaches it had found.
Fairfax Media last year revealed advisers within the National Australia Bank had been wrongly witnessing some of the forms, but ASIC's move to put the entire advice sector on notice suggests it is a wider problem across the industry.
Wrongly-witnessed death nominations could be invalid, and therefore rejected by superannuation fund trustees when paying out a client's super and insurance benefits, ASIC said.
"ASIC has become aware of a widespread practice among financial advisers of witnessing or having staff members witness client signatures on binding death nomination forms without being in the presence of the signatory. In other cases, forms have been backdated," the watchdog said in a statement.
Mr Kell warned financial advice licensees - which include banks - that they are ultimately responsible for the behaviour of staff, and needed to effectively monitor their activities.
"Improper and unethical practices around binding death nomination forms can lead to very poor consumer outcomes. Advisers, licensees and their staff who engage in these practices should consider this a final warning," Mr Kell said.
NAB's problems with death beneficiary forms were first revealed in May last year. In October, chief executive Andrew Thorburn told the government's banking inquiry the problem had occurred about 2,000 times, flagging consequences for staff.
NAB said in October that no customers were harmed by the behaviour, nor did staff benefit, and the trustee would honour the falsely witnessed forms. NAB said the behaviour was a breach of its own policies, but not the law.
A NAB spokeswoman on Friday said staff involved in incorrect witnessing of the forms had faced "internal consequences, including financial consequences."
ASIC on Friday urged advice businesses needed to make sure their staff were appropriately trained, and that they closely monitored their staff's conduct.
NAB told the inquiry last year it first detected the problems in November 2015, but did not report it to ASIC until May in order to give the regulator a "complete picture."
ASIC, which has been ramping up pressure on banks to report breaches, said on Friday that licensees needed to have systems to identify and report breaches in a "timely manner."
"Inadequate or late reporting could indicate to ASIC that the licensee has broader compliance and cultural issues and would be a red flag for closer scrutiny," ASIC said.
