The Australian Prudential Regulation Authority has responded to the judgment today in its court action against IOOF entities, directors and executives.
APRA initiated the action last December due to its view that IOOF entities, directors and executives had failed to act in the best interests of their superannuation members.
The regulator noted that before taking the court action it had sought to resolve concerns with IOOF over several years but considered that it was necessary to take stronger action – through use of directions, conditions and court action – after concluding the company was not making adequate progress, or likely to do so in an acceptable period of time.
The court today dismissed APRA’s application for a finding that IOOF entities, directors and executives had contravened their obligations under the Superannuation Industry Supervision Act 1993 (SIS Act). Accordingly, the case cannot proceed to a hearing on penalties, including disqualification.
APRA is examining the lengthy judgment in detail and will then make a decision on whether to pursue an appeal.
Although "disappointed" by the decision, APRA Deputy Chair Helen Rowell said the case examined a range of legal questions relating to superannuation law and regulation that had not previously been tested in court, relating to the management of conflicts of interest, the appropriate use of super funds’ general reserves and the need to put members’ interests above any competing priorities.
“Litigation outcomes are inherently unpredictable, however APRA remains prepared to launch court action – where appropriate – when entities breach the law or fail to act in an open and cooperative manner. APRA still believes this was an important case to pursue given the nature, seriousness and number of potential contraventions APRA had identified with IOOF,” Mrs Rowell said.
Additional licence conditions that APRA imposed on IOOF in December are unaffected by today’s judgment and remain in force.
Despite today’s decision, Mrs Rowell said APRA’s tougher approach to enforcement had led to IOOF being better placed to deliver sound, value-for-money outcomes for its members.
“APRA has seen significant improvement in the level of cooperation from IOOF since this case was launched. Additionally, the new licence conditions have enhanced IOOF’s organisational structure and governance, including the role and independence of the trustee board within the IOOF group. This will better support effective identification and management of future conflicts of interest,” she said.
James Mitchell is the editor of the Wealth and Wellness suite of platforms at Momentum Media including Investor Daily, ifa, Fintech Business, Adviser Innovation and Wellness Daily.
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