Furious APRA re-opens investigation into Colonial First State and IOOF after royal commission hearings

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  • APRA says the royal commission hearings have revealed “serious questions of compliance” by some super fund trustees.
  • The prudential regulator alos says it appears one fund made “untrue” statements.
  • APRA is taking another look at the actions of the Commonwealth Bank’s Colonial First State and IOOF, Australia’s second largest wealth manager.

Australia’s banking regulator is investigating misconduct by some superannuation funds based on details uncovered during hearings at the financial services royal commission.

The Australian Prudential Regulation Authority says “serious questions of compliance” were raised about certain trustees and directors of super funds, and that some evidence ran counter to what the funds had explained to the regulator about problems with customer accounts.

It also says it appears an important statement made by a fund to APRA was “untrue”.

“APRA is reviewing this material to identify further steps to be taken,” says the regulator in a written submission to the commission.

The regulator is taking another look at the Commonwealth Bank’s Colonial First State and IOOF, Australia’s second largest wealth manager.

APRA opened the possibility of legal action, saying the fact that no litigation has been launched doesn’t mean there will be no proceedings in the future.

While the development is problematic for the funds, it is also embarrassing for the regulator which appears to have failed to get to the bottom of problems in the institutions it oversees.

Colonial First State charged dead people fees for financial advice and failed to move members into a low fee MySuper fund. It has rejected suggestions its actions may be criminal breaches of the Superannuation Industry Supervision Act (SIS) and the Corporations Act.

IOOF used its members’ own money to compensate them after it mistakenly reduced distributions to members.

APRA says it raised concerns with the funds at the time and the action taken then was considered to be in the long-term best interests of members.

Image: Screenshot from the Royal Commission. IOOF chief executive Chris Kelaher was singled out for criticism by APRA.

“However, the commission has brought additional information to light, some of which appears inconsistent with information previously provided to APRA,” says the regulator in a written submission to the commission.

“APRA is examining these issues further to consider whether additional action is necessary.”

The regulator also looked at evidence to the commission from IOOF chief executive Chris Kelaher.

“He demonstrated a failure to understand the covenants under the SIS Act and obligations of a trustee under trust law,” APRA told the royal commission.

“While a number of changes were agreed to at the IOOF board meeting of 1 August 2018, it seems that these matters were a ‘matter of indifference’ to Mr Kelaher, who did not accept that there were legitimate governance issues that needed to be addressed.

“It also appears on the evidence before the Commission that an important statement made in a letter to APRA dated 19 April 2017 was untrue.”

Kelaher was asked in the commission about a letter sent by to members in April 2016.

He accepted in evidence that statements made in that letter were “potentially capable of misleading” although he was “not sure what turns on it”.

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