Add Category
Updated
The financial regulator's court action against superannuation and wealth management giant IOOF has claimed its first two scalps.
Key points:
- APRA is seeking court orders to ban IOOF directors from managing super funds
- IOOF paid compensation to its superannuation members out of their own retirement savings
- The company lost $900m in market value after APRA announced its court action
IOOF said, in a statement, its managing director Chris Kelaher and chairman George Venardos have "agreed to step aside" immediately, and will be "on leave" as they prepare to defend their cases in court.
The Australian Prudential Regulation Authority (APRA) alleged, on Friday, that Mr Kelaher and Mr Venardos — along with three other top executives — failed to act in the best interests of their superannuation members.
The regulator is seeking orders from the Federal Court for them to be banned from managing people's retirement savings
Following APRA's bombshell announcement on Friday, IOOF's market value plunged by 36 per cent, effectively wiping out all its gains in the last decade.
Over two trading days, IOOF has lost more than $1 billion, after falling by another 6.7 per cent to $4.29 by 12:15pm (AEDT) today.
"IOOF" stands for the Independent Order of Odd Fellows and it is a major publicly-listed company and, at its peak, was worth more than $2.5 billion.
It also has about 500,000 customers and manages $126 billion in members' funds.
Damage control
In a statement to the ASX, IOOF said Renato Mota has been appointed the acting CEO, while non-executive director Allan Griffiths has been promoted to acting chairman.
Mr Griffiths has maintained the company would "vigorously" defend the matter.
"We maintain our position that the allegations made by APRA are misconceived," he said.
"The board believes that, in the interests of good governance, it is appropriate that Chris and George step aside from their positions.
"The board will also commence the search for an additional non-executive director".
IOOF said the three other executives in APRA's crosshairs — chief financial officer David Coulter, company secretary Paul Vine and general counsel Gary Riordan — will remain in their positions, but will not have any responsibility in managing superannuation, or dealing with the regulator.
In the last decade, APRA has not commenced any court action against anyone prosecuted anyone in the superannuation sector.
In August, the banking royal commission heard testimony from Mr Kelaher about a questionable business practice which he claimed would pass the "pub test".
Mr Kelaher told the commission that IOOF made an accounting error which caused financial loss to its members.
IOOF then sought to compensate them by dipping into the pool of reserve funds — owned by super fund members — rather than its own corporate profits.
The regulator had tried to remedy its concerns with IOOF for several years, APRA's deputy chair Helen Rowell said on Friday.
However, she "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".
Ms Rowell said the regulator was "frustrated by a disappointing level of acceptance and responsiveness to the issues" from IOOF.
The regulator maintains there was a "reasonable basis" to conclude the IOOF — along with its licensees IIML and Questor Financial Services — breached the Superannuation Industry Supervision (SIS) Act and failed to meet prudential standards.
Topics: business-economics-and-finance, company-news, regulation, superannuation, australia
First posted