Australian Securities and Investments Commission v Mercer Superannuation (Australia) Limited 2024 [FCA] 850

Introduction

On 2 August 2024, in proceedings brought by the Australian Securities and Investments Commission (ASIC), the Federal Court of Australia (the Court) found that Mercer Superannuation (Australia) Limited (Mercer), a superannuation trustee, contravened the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) as it made false or misleading statements about its financial services (in breach of s 12DB(1)(a) of the ASIC Act), and engaged in conduct that was liable to mislead the public in relation to the nature and characteristics of its financial services (in breach of s 12DF(1)of the ASIC Act).

The Court subsequently convicted Mercer and imposed a pecuniary penalty of $11,300,000.

Facts

On 13 September 2023, ASIC alleged Mercer had contravened ss 12DB(1)(a) and 12DF(1) of the ASIC Act through statements made on its website and in a video published online (the Representations), made during four successive periods between 12 November 2021 to 1 March 2023.

The Representations were that Mercer’s ‘Sustainable Plus Options’ (their financial services provided through investment options in Mercer Super Trust) were not, and would not be, invested in companies involved in or deriving profit from carbon intensive fossil fuels, alcohol or gambling.

Evidence

The parties agreed to the facts underlying the contraventions, so the fact-finding role of the Court in the proceeding was limited.

Mercer admitted it contravened s 12DB(1)(a) of the ASIC Act. The Representations were false and misleading because six out of seven of its investment options did include investments in companies involved in, or deriving profit from, the production or sale of alcohol, gambling and the extraction or sale of carbon intensive fossil fuels, and Mercer’s investment policies permitted such investments.

Mercer further admitted that it contravened s 12DF(1) of the ASIC Act by engaging in conduct that was liable to mislead the public because it did not have reasonable grounds to make the Representations that the Sustainable Plus Options did not include investments in companies involved in, or deriving profit from, the production or sale of alcohol, gambling and the extraction or sale of carbon intensive fossil fuels, as the Sustainable Plus Options did have exposure to multiple companies involved in such activities.

The Court found the contraventions admitted by Mercer were serious. Mercer failed to implement adequate decision-making, approval, and monitoring processes to ensure that environmental, social and corporate governance (ESG) claims in relation to its superannuation products were accurate. Further, Mercer failed to carry out a full and thorough review of its ESG compliance until after the commencement of the proceeding.

Consideration

When considering deterrence, the parties agreed on the need for penalties with a strong deterrent effect, particularly because of the rise in demand for investment products focused on ESG considerations.

The parties jointly submitted that Mercer should have had adequate processes and procedures in place to prevent and/or identify and remove marketing that was false or misleading. This reinforced the need for a penalty which would deter it from any such conduct in the future.

However, the Court and the parties also gave recognition to the mitigating circumstances, such as Mercer’s cooperation with ASIC, readiness to admit the wrongdoing, and taking remedial and corrective action.

Decision

The Court ordered:

• A pecuniary penalty of $11,300,000 in respect of Mercer’s conduct for contravening Australia’s financial services laws;
• An adverse publicity order to be published on the “Sustainable investing with Mercer Super” webpage; and
• Mercer to pay ASIC’s costs of and incidental to the proceeding, in the agreed sum of $200,000.

Compliance Impact

The penalties imposed in this case reflect the seriousness of the contraventions and serve as a general deterrent to any other person from engaging in similar conduct.

This case sends a clear signal to Australian Financial Services Licence holders and other market participants to ensure transparency and accuracy when making environmental and sustainability claims.