ASIC Secures $10.3M Penalty Against Mercer Super for Reporting Failures

The Federal Court has ordered Mercer Super to pay $10.3 million in penalties after finding that the fund ran deficient compliance systems for the better part of three years, leaving ASIC in the dark about investigations into serious member service failures. For any Australian financial services licensee, this outcome is a direct signal: the reportable situations regime carries real teeth, and regulators will pursue sustained non-compliance at scale.

What the Court Found

The proceedings centred on Mercer Super's conduct between October 2021 and September 2024. During that period, the court determined that the fund's systems for identifying and escalating reportable situations were structurally inadequate.

The core findings

Mercer Super failed to report seven qualifying investigations to ASIC at all. A further investigation was reported late. On that late report, the court went further: it found Mercer Super had not taken all reasonable steps to ensure accuracy, and that the information submitted was false or misleading, specifically understating the number of affected members.

The investigations that went unreported or were delayed involved issues including insurance premiums charged to members after their deaths and only refunded later, and failures to update member accounts that led to higher fees and less favourable insurance policies. These are not peripheral compliance technicalities. They are, by definition, the kind of potentially significant breaches the regime exists to surface.

Why the Reportable Situations Regime Exists

Under the Corporations Act, Australian financial services licensees are required to notify ASIC promptly when they open investigations into potentially significant breaches of their core obligations. The purpose is threefold: give the regulator early visibility of misconduct, push licensees to prioritise internal investigations and remediation, and maintain transparency across the sector.

What ASIC said publicly

ASIC Chair Sarah Court described the deficiencies as inappropriate for a fund of Mercer Super's scale, noting it manages close to $80 billion in retirement savings on behalf of more than one million members. The Chair made clear that when investigations into serious member issues are not reported as required, problems can persist unchecked, compounding harm over time. Justice Button, in handing down the decision, found that ASIC's supervisory role had been materially compromised by the duration of the unreported investigations, and that Mercer Super had been on notice that its systems were deficient.

Sector Context: A Pattern of Escalating Action

This penalty does not sit in isolation. ASIC has pursued a sequence of enforcement actions against superannuation trustees in recent years, and the trajectory is towards larger penalties and broader scope.

Recent enforcement milestones

In November 2025, the Federal Court ordered United Super (trustee of Cbus) to pay $23.5 million for serious failures in processing death benefit and insurance claims. In May 2026, Telstra Super was found to have breached its internal dispute resolution obligations, with a penalty hearing pending. And in March 2025, ASIC launched proceedings against AustralianSuper over delays affecting nearly 7,000 death benefit claims. Separately, Mercer Super itself was fined $11.3 million in August 2024 for misleading statements about sustainable investment options.

The pattern is consistent: ASIC is holding trustees accountable for member services failures and systemic compliance deficiencies, not just one-off errors. Understanding how regulators are raising the bar on independent reconciliation practices is increasingly relevant to any financial services firm assessing its own reporting infrastructure.

Compliance Implications for Firms

The Mercer Super case offers specific, actionable lessons for compliance officers and advisers operating in the Australian financial services sector.

Systems and escalation controls

The court found Mercer Super was on notice that its compliance systems were inadequate yet failed to remediate them. This is the core of the liability. Firms need documented, tested processes for identifying investigations that meet the reportable threshold and escalating them within the required timeframe. Manual or ad hoc approaches carry significant risk at volume.

Accuracy of regulatory submissions

The finding of false or misleading information in a late report compounds the lesson. Regulators treat inaccurate disclosures as a separate and aggravating failure. Any submission to ASIC under the reportable situations regime should be reviewed for completeness and accuracy before filing. Understating scope, whether through error or expediency, is not a mitigating factor.

Board and governance oversight

A sustained three-year failure across a fund of this size points to a governance gap, not merely an operational one. Boards and trustees should be receiving regular reporting on the status of open investigations and any notifications made or pending under the reportable situations regime. Reviewing how compliance reporting standards are evolving across the Australian regulatory landscape is a useful reference point for governance teams.

FAQs

What is the reportable situations regime?

It is a framework under the Corporations Act that requires Australian financial services licensees to notify ASIC promptly when they commence investigations into potentially significant breaches of their core obligations. The intent is to give the regulator early visibility and ensure licensees prioritise remediation.

Why did Mercer Super face such a large penalty?

The penalty reflected the duration of the non-compliance (October 2021 to September 2024), the number of investigations that went unreported entirely, the late filing with inaccurate information, and the scale of the fund. ASIC also emphasised that Mercer Super had been on notice that its systems were deficient.

What types of issues were covered by the unreported investigations?

They included insurance premiums charged to deceased members and refunded only later, and failures to update member accounts leading to higher fees and less favourable insurance policies. These represent potentially significant breaches of the fund's obligations to members.

Does this penalty have implications beyond superannuation trustees?

Yes. The reportable situations regime applies to all Australian financial services licensees, not just superannuation funds. The principles, prompt identification of qualifying investigations, accurate and timely reporting, adequate supporting systems, are directly relevant to any AFSL holder.

What should compliance teams do immediately following this decision?

Review internal processes for identifying investigations that meet the reportable threshold, test escalation pathways, confirm that any pending notifications are accurate and complete, and brief the board on the current state of reportable situations compliance. Document the review.

Source: ASIC