Australia’s $2.6 trillion superannuation industry is shrouded in darkness due to a lack of regulation of the conduct of the trustees running funds, the royal commission has heard.

The criticism of the lack of regulation of the sector was delivered by counsel assisting the royal commission, Michael Hodge, QC, at the start of two weeks of hearings into misconduct within the sector.

Mr Hodge started the morning by pointing out the gap created by the way the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) regulated the sector.

APRA saw itself as a prudential regulator and not a conduct regulator, Mr Hodge said. On the other hand, ASIC was only responsible for the conduct of trustees of superannuation funds under the Corporations Act, and was not responsible for monitoring conduct that was in breach of the Superannuation Industry (Supervision) Act, he added.

“Consumers are unable to do anything more than peer dimly through the darkness of their superannuation trustee,” Mr Hodge said.

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“What happens when we leave these trustees alone in the dark with our money?”

The royal commission will spend the next two weeks hearing evidence about misconduct and conduct falling below community expectations within Australia’s superannuation sector. The scandal-plagued, largely unregulated self-managed superannuation sector will escape the commission’s gaze.

Thirteen funds have been called to give evidence in regards to governance and administration of funds and potential misconduct.

Mr Hodge said retail funds operated by the big banks had a far greater number of problems than industry superannuation funds.

Mr Hodge said the examples of misconduct filed by industry super funds were “extremely minimalist” when compared to issues identified by retail superannuation funds.

No executives from the CFMMEU-backed industry fund CBUS will be called to give evidence after the royal commission reviewed its submissions.

Each of the funds were expected to use 20 pages to outline their failings in secret submissions ahead of the hearing, but sources told Fairfax Media that some industry funds struggled to fill the 20 pages due to low levels of misconduct.

Unlike in other hearings, no consumers will be called to give evidence during the next two weeks of hearings.

Unlike in other hearings, no consumers will be called to give evidence during the next two weeks of hearings.

Photo: Tamara Voninski

Listing some instances of misconduct, Mr Hodge said the Commonwealth Bank and IOOF had admitted in their respective submissions that they had charged some customers fees for services they did not receive, while National Australia Bank acknowledged that between 2012 and early 2017 its superannuation trustee, Nulis, incorrectly charged $35 million in fees to more than 200,000 customers.

Industry super-backed website The New Daily will also be a focus of the royal commission due to its use of members' money to promote industry super to new members.

Two executives from National Australia Bank superannuation trustee Nulis – NAB's BNZ group executive Paul Carter (who was head of NAB wealth products until early 2017) and former Nulis chairman Nicole Smith – will be called to give evidence later on Monday.

The conduct we will investigate is unobservable and unobserved.

Mr Hodge said that unlike in other hearings, no consumers would be called to give evidence during the next two weeks of hearings.

“The conduct we will investigate is unobservable and unobserved,” Mr Hodge said.

Keeping with the theme of darkness, Mr Hodge said the royal commission would not read through findings of potential misconduct at the end of the hearings, as in previous rounds, but rather would deliver proposed recommendations on policy.

Preliminary findings of misconduct will be published a week after the hearings. No explanations were provided as to why there would be increased secrecy surrounding the royal commission’s superannuation hearings.

More to come

Counsel assisting the commission, Michael Hodge, pointed out the gap created by the way APRA and ASIC regulated the sector.

Counsel assisting the commission, Michael Hodge, pointed out the gap created by the way APRA and ASIC regulated the sector.

Photo: Webcast

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