Binding death nomination forms enable a person to nominate their superannuation beneficiary, and are an important part of estate planning.

The proper execution of binding death nomination forms is important because this form directs the trustee of the superannuation fund to pay superannuation and insurance benefits in accordance with the account holder’s instructions. Financial advisers play an important role in ensuring that preparation and execution of these instructions takes place correctly.

The Australian Securities and Investments Commission (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.

Each of these practices fails to comply with the law and may lead to the nominations being invalid, resulting in the death nomination being rejected. The trustee may then choose to exercise its discretion in a manner other than in accordance with the account holder’s nomination, causing delays and uncertainty about the payment of the death benefit.

ASIC has recently put the financial advice sector on notice about meeting requirements for witnessing signatures, after receiving a number of breach reports and industry intelligence that made it clear that, for some organisations, cutting corners on binding death nomination forms was the norm.

ASIC understands that these organisations have taken steps to change their processes, and we want to ensure that the entire industry knows that claiming ignorance of the correct process, or claiming that it is standard procedure, will not be accepted as an excuse for this behaviour.

Australian financial services (AFS) licensees and advisers have a professional and legal obligation to comply with the law. Taking short cuts which result in important forms being invalid and thereby jeopardising the account holder’s wishes, does not meet the minimum advice and conduct standards expected by ASIC.

AFS licensees must:

• Train staff on their professional and ethical obligations

AFS licensees have an obligation to ensure their staff are adequately trained and understand their professional and ethical obligations. A high standard of adviser professionalism, judgement and integrity is vital to ensuring that consumer trust and confidence is maintained in the financial services sector. Proper execution of documents is part of an adviser’s professional and ethical obligations.

• Monitor and supervise their representatives　

ASIC expects that licensees will maintain adequate monitoring and supervision arrangements as an integral feature of their risk and compliance frameworks. Part of monitoring and supervising advisers involves licensees regularly reviewing the conduct of their advisers and performing ‘spot checks’ of key documents to ensure they are appropriately executed.

Where irregularities are found in key documents, licensees should conduct the necessary enquiries and responses in a timely manner. This may include contacting the affected clients, remediating clients where appropriate and conducting broader reviews of the relevant adviser’s client files.

• Remediate consumers where misconduct is found

AFS licensees must ensure that they proactively address any systemic problems caused by the conduct of their advisers and, where necessary, put processes in place to remediate their clients in a timely, fair and transparent way for loss.

ASIC has published guidance on client review and remediation in Regulatory Guide 256 Client review and remediation conducted by advice licensees (RG 256). While the guidance is directed at licensees that provide personal advice to retail clients, the principles set out in the guidance should be applied to other review and remediation situations where relevant.

• Identify breaches in a timely manner 　

ASIC expects licensees to have effective systems in place for identifying, escalating and reporting 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.