Industry super funds are copping some bad press nowadays, with stories on investing in Russian “blood” oil, losing money on a failed US renewable energy business and exaggerating the value of non-market investments. However, the latest revelation has resulted in the Wayne Swan-chaired Cbus being accused of playing hardball with members who had death or disability claims.

The bad behaviour was so clearcut that after an ASIC investigation and then legal action, a Federal Court slammed a $23.5 million fine on the super fund for taking too long to pay out members in financial difficulties following a death or disability event in their lives. This penalty is on top of the $32 million in compensation that the fund was forced to pay out.

And get this, this slug will be paid by all the 7,400 members of the industry super fund, which isn’t the first time this fund has copped a kick in the pants from the long arm of the law! “The Federal Court approved penalty, announced on Tuesday, comes a year after the corporate cop sued the super fund’s trustee, United Super, over systemic failures in claims-handling processes that affected thousands of members,” The Australian’s Ciona O’Dowd reminded us. “In some cases, Cbus took more than a year to pay out death benefits or disability payments to some of the country’s most vulnerable people.”

Despite earlier disagreeing with ASIC’s allegations, Cbus agreed with the facts as the regulator saw then, despite earlier claiming that the case against them was “vague and embarrassing”.

O’Dowd made the point that the actions of the fund meant that members already under emotional stress had to deal with being “unable to pay rent or make mortgage repayments, forcing them to ask for money from friends, family and strangers.”

Cbus has publicly apologised for behaviour of the fund’s employees and contractors (as an outside business has been blamed for the mistreatment). But as Rupert Murdoch one told us: “The buck stops with the guy who signs the cheques.” So, in this case it’s hard for the Chairman of Cbus, Wayne Swan, to totally excuse himself from the behaviour of his fund.

It was this kind of bad behaviour of banks and insurance companies that resulted in the Hayne Royal Commission, which saw industry super funds gain from the penalties applied to their financial institution rivals. Many banks have got out of wealth management and super, which has helped the growth of industry super funds.

While I’m a fan of industry super funds, especially for low balance and lower income workers, they’re not perfect.

Lucas Baird of the AFR recently revealed the following: “Hundreds of millions of dollars in Australian retirement savings and state investments are at risk after three of the country’s largest fund managers found themselves exposed to the spectacular collapse of American solar power and battery storage giant Pine Gate Renewable.”

Baird reported that “AustralianSuper, HESTA and the Queensland government’s investment arm, QIC, have an indirect exposure to the prominent bankruptcy case due to substantial interests in one of its biggest backers – Generate Capital.”

And then there have been claims from APRA that the likes of Hostplus and AustralianSuper invested either directly or via external venture capital managers (such as Blackbird) in tech companies such as Canva. However, the funds were too slow to mark the value of their investments in Canva down, when stock markets were smashing the share prices of other tech companies.

Failure to value properly and fairly helps these funds exaggerate their returns compared to other super funds that only invest in assets whose values come from the stock market and other objectively valued markets. Given the importance of industry super funds, these actions by ASIC and APRA to keep them honest is a positive trend.