The action comes after IOOF and Mr Kelaher were accused by the royal commission of not understanding the responsibilities of being a superannuation trustee or the director of a company that operates a trustee business. APRA made the same assessment of Mr Venardos in a report about IOOF that was tendered to the royal commission.
An investigation by The Sydney Morning Herald and The Age in 2015 found IOOF was riddled with conflicts and misconduct, including in its funds management arm, where in a single year it had racked up dozens of serious breaches.
Since the media investigation, APRA has raised repeated concerns about the governance at IOOF. The Australian Securities and Investments Commission (ASIC) launched an investigation into the group in 2015 following the media revelations but decided to take no action.
ANZ Bank is in the process of selling its superannuation business to IOOF but the performance of Mr Kelaher at the royal commission has raised concerns over the appropriateness of that deal.
ANZ deputy CEO Alexis George on Friday morning said in a statement the bank would “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,” Ms George said.
APRA is alleging Mr Kelaher, Mr Venardos and chief legal counsel Gary Riorden are not fit and proper people to be running a superannuation company.
APRA made the same allegations against IOOF chief financial officer David Coulter and company secretary Paul Vine, according to court documents filed in the Federal Court.
“The contravention of the SIS Act (Superannuation Industry Supervision) together with the conduct of Kelaher, Venardos, Coulter, Vine and Riordan in response to APRA’s prudential supervision, demonstrate that they each are not a fit and proper person to be a responsible officer of a trustee of a superannuation entity which are grounds for them to be disqualified,” the documents say.
APRA has accused IOOF of failing to sort out its conflicts of interest and the lack of compliance by an IOOF investment manager, Questor.
APRA alleges that on three separate occasions in 2015, Questor and IOOF’s super arm, IOOF Investment Management (IIML), contravened the Superannuation Industry (Supervision) 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.
Mr Kelaher was quizzed over IOOF’s decision to compensate superannuation members with their own money at the royal commission. He told the commission that because all members had been made good, IOOF’s compensation program passed the “pub test”.
IOOF said it was “disappointed” by the APRA action.
“IOOF has been working cooperatively with APRA to actively implement various agreed initiatives … The historical matters the subject of the proceedings were disclosed to APRA a number of years ago. IOOF has already addressed or is addressing them, and it has been constructively working with APRA to this end,” it said in the statement.
But in a media statement on Friday morning, APRA deputy chair Helen Rowell said the regulator had tried to resolve its concerns with IOOF over several years, and took the 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.”
According to the court documents, APRA has issued show cause notices setting out APRA’s intention to direct IOOF’s super arm, IOOF Investment Management Ltd (IIML), to comply with its Registrable Superannuation Entity Licence and impose additional conditions on the licences of IIML, Australian Executor Trustees Ltd and IOOF Ltd.
These entities have 14 days to respond to this notice.
Sarah is a business courts reporter based in Melbourne.