APRA moves to disqualify IOOF executives including MD

The Australian Prudential Regulation Authority (APRA) has initiated action against IOOF, including its managing director, Christopher Kelaher.

The regulator said it had initiated actions against IOOF entities, directors and executives for failing to act in the best interests of superannuation members and that it had commenced disqualification proceedings and was seeking to impose additional licence conditions and issue directions to APRA-regulated entities in the IOOF group.

The individuals included in the disqualification proceedings are Managing Director Chris Kelaher, Chairperson George Venardos, Chief Financial Officer David Coulter, General Manager – Legal, Risk and Compliance and Company Secretary Paul Vine, and General Counsel Gary Riordan.

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“APRA has issued a show cause notice setting out APRA’s intention to direct IOOF Investment Management Limited (IIML) to comply with its Registrable Superannuation Entity (RSE) Licence and impose additional conditions on the licenses of IIML, Australian Executor Trustees Limited (AET) and IOOF Ltd (IL). These entities have 14 days to respond to this notice.”

“The proposed conditions and directions to comply with conditions seek to achieve significant changes to the identification and management of conflicts of interest by IIML, AET and IL and facilitate APRA’s ability to take further enforcement action should this not occur. The proposed additional conditions on the licences of IIML, AET and IL are based on issues and concerns raised by APRA since 2015 relating to the entities’ organisational structure, governance and conflicts management frameworks, and require the entities to address these within specified timeframes. The proposed directions for IIML relate to an independent report issued by Ernst & Young, the findings of which provide a reasonable basis to conclude that IIML has breached section 52 of the Superannuation Industry (Supervision) Act 1993 (SIS Act), Prudential Standard SPS 520: Fit and Proper and Prudential Standard SPS 521: Conflicts of Interest.”

The announcement said APRA had also commenced proceedings in the Federal Court of Australia to seek the disqualification of five individuals that, at relevant times, were responsible persons of IIML and Questor Financial Services Limited (Questor). The proceedings also seek a court declaration that IIML and Questor (which at the material times were RSE Licensees owned by IOOF Holdings Limited) breached the SIS Act.

“The Concise Statement seeks disqualification orders and declarations in relation to breaches of sections 52 and 55 of the SIS Act and Prudential Standards, and associated conduct. As outlined in the Concise Statement, APRA considers that IIML, Questor and the relevant individuals did not appropriately acknowledge and address issues concerning conflicts of interest raised by APRA from 2015 to date. In particular, APRA identified that on three separate occasions in 2015, Questor and IIML contravened the SIS Act by deciding to differentially compensate superannuation beneficiaries and other non-superannuation investors for losses caused by Questor, IIML or their service providers, with superannuation beneficiaries being compensated from their own reserve funds rather than the trustees’ own funds or third-party compensation.”

“If successful, the disqualification proceedings would prohibit the above individuals from being or acting as a responsible person of a trustee of a superannuation entity,” the APRA announcement said.

Commenting on the move, APRA Deputy Chair Helen Rowell said APRA had sought to resolve its concerns with IOOF over several years but considered it was necessary to take stronger action after concluding the company was not making adequate progress, or likely to do so in an acceptable period of time.

“APRA’s efforts to resolve its concerns with IOOF have been frustrated by a disappointing level of acceptance and responsiveness to the issues raised by APRA, which is not the behaviour we expect from an APRA-regulated entity,” Mrs Rowell said.

“The actions we are now taking are aimed at achieving enduring change to ensure that the trustees of the superannuation funds operated by IOOF fully meet their obligation to put the interests of members ahead of all other interests.

“Furthermore, the individuals included in the proceedings have shown a lack of understanding of their personal and trustee obligations under the SIS Act and at law, and a lack of contrition in relation to the breaches of the SIS Act identified by APRA.”

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APRA will not win this one and the report should clarify which platform (Bridges) was supposedly affected. The Royal Commission has done a lot of unnecessary damage to the financial services industry causing concerns with investors and financial planners alike. APRA is trying to bare its gums to demonstrate its reason for existence. Kelleher has already provided credible evidence and we must not forget, no superannuant was pecuniarily affected in a negative way.

devil's advocate you have got the bait out here, Chris Kelleher represents exactly the type of people we don't want in financial services..arrogant, brash and lacking any sort of empathy. Royal Commission has done damage? More like it has shone a light on the damage that people like Chris have done to the industry. We have no one to blame but our selves if we continue to make excuses for wrong doing.

I don't know how you can say "and we must not forget, no superannuant was pecuniarily affected in a negative way." You and I must be reading different news items.
The crux of APRA's action is that Questor and IIML used their own funds (profits) to compensate non-superannuation investors for losses caused by Questor, IIML or their service providers. But when it came to compensating superannuation beneficiaries the source of the compensation was the reserve component of the pool of superannuation funds under management.

Don't agree with 'You are Kidding' & think Devil's Advoc has got a better grip of the horns of this one.

If APRA were serious in applying a consistent approach then essentially all ISA funds exec's from the chairman to the Investment heads would need to be thrown under the bus for the "organisational structure, governance and conflicts management frameworks" and unresolved "conflicts of interest" issues.

One just has to look at AustralianSuper one of its largest flagships, not to mention the recent mass dismissal of 5 key exec's from REST to realise they have significant issues that neither ASIC nor APRA are in a rush to investigate. One would have to wonder whether they are purposely allowing the ISA enough breathing space to bury all those dead bodies deep enough, that when the supposedly impartial regulators finally get around to doing their superficial investigation, that they can publicly declare there is no evidence or bad smell.

The RC was far from unbiased and while I applaud all the uncovering of improper conduct by the banks, I think it is encouraging that at least some of these heads of institutions take a stance and push back as we do not need the economy pushed too far to the left or else we'll have 'the recession we didn't need to have', to purposely mis-paraphrase Keating.

If the RC had conducted the full mandate it was supposed to, unbiased across all relevant areas including ISA, to the same degree that it took the banks to task and we all then reset the entire financial services spectrum with a clean start across the board, I would be in favour of their outcomes.

It didn't. The RC was little more than a politicized exercise with a predetermined agenda to further empower and enrich union funds, reduce our numbers and the threat we & banks represent to their future wealth. Bear in mind ISA funds memberships will begin to fall off a cliff as baby boomers retire, therefore unions and labor are looking now to avoid any threats to their future cash cow.

Even if you don't believe APRA is implicit in the push to the left described above, you would have to recognise that as a bare minimum it is taking an easy prize by identifying an issue raised at the Royal Circus and wanting to be seen to be 'taking action'. One would have to wonder how many more of the conflict of interest issues have been ignored by the other institutions and ISA, and if they took the same action across all, what position would that leave us all in?

I'm sure if you are left leaning yourself, you'll try to discredit all the above with the age old 'conspiracy theory' cry, but as a former detective once said to me, if ever you are after answers, follow the money first.

That' s an excellent 'hit the nail right on the head' post. You have covered off on the Royal Circus ringmaster and all the performers very nicely. This country is no where near 'lucky' any further and has fast become the stupid country. Cruel the excessive amount we pay for products and good and services compared to many others. Few here in control to do anything about it though. The same applies to APRA, the general public may think differently but they simply are not programmed to act in the best interests of the country and the ISA it too well unified and has simply too big a stronghold. A by-product of the RC was always going to reduce our numbers but even without that FASEA was always going to do a better job. The real crooks will all live to fight a better day.

I don't think that the RC was "left leaning" -- it was after all commissioned by a right leaning government -- but it certainly was a politicized exercise.
That the RC outcome seems to "further empower and enrich union funds" is to my mind a consequence of where ASIC and APRA have decided to look in the past.
My impression is that the Royal Commission ONLY looked at matters that ASIC or APRA were already faffing around with in some way.

Well said Anonymous, agree with your sentiment and am beginning to wonder why as journo's MM doesn't look further into some of the 'harder' issues you've raised regarding ISA funds?

Are APRA or ASIC intending to take the same stance against the execs of the banks and insurers? The RC showed clearly that they were at fault. If they are looking to disqualify IOOF execs then why not the execs of the banks or AMP or TAL or Freedom?

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