The wealth management arm of ANZ Bank has said it is assessing its options surrounding a proposed deal after the Australian Prudential Regulation Authority (APRA) announced it is taking action against financial services company IOOF Holdings.
In October 2017, ANZ agreed to sell OnePath Pensions and Investments (OnePath P&I) and aligned dealer groups (ADG) to IOOF for A$975m (£553m, $705m, €619m).
On Friday, APRA said it is seeking Federal Court of Australia approval to disqualify three executives and two directors from the industry, including IOOF’s chairman and managing director, for failing to act in the best interests of superannuation members.
According to local media reports, however, managing director Chris Kelaher and chairman George Venardos have both stepped down since APRA announced its regulatory action.
The watchdog also said it has commenced disqualification proceedings and is seeking to impose additional licence conditions and issue directions to APRA-regulated entities in the IOOF group.
ANZ deputy chief executive, Alexis George, said: “Given the significance of APRA’s action, we will assess the various options available to us while we seek urgent information from both IOOF and APRA.
“The work to separate pensions and investments from our life insurance business continues. There is a framework available to complete the Zurich transaction that does not involve IOOF.”
Source: ANZ – 2017
Regulatory action
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).
The entities have 14 days to respond to this notice.
APRA has 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) breached the Superannuation Industry (Supervision) [SIS] Act.
The individuals included in the disqualification proceedings are Chris Kelaher (managing director – who has now stepped down) George Venardos (chairperson – who has now stepped down), David Coulter (chief financial officer) Paul Vine (general manager – legal, risk and compliance and company secretary), and Gary Riordan (general counsel).
The regulator seeks disqualification orders and declarations in relation to breaches of sections 52 and 55 of the SIS Act and Prudential Standards, and associated conduct.
APRA added 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”.
APRA said: “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.
Concerns
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.
“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.”
