Committee member and Liberal MP Jason Falinski picked up his colleague Tim Wilson’s line of questioning at a recent hearing of the committee, grilling APRA as to whether it believed fines for breaches of advice laws were paid for by members of industry fund Aware Super, then known as First State Super.
“If you fine AMP or a retail super fund, their shareholders pay for it. Talk me through the case of First State Super, which is now Aware Super, when they had a situation where they were fined for financial advice that they were providing. Who paid those fines? Was it paid by the members or by the shareholders?” Mr Falinski asked.
The comments follow Mr Wilson’s questioning of ASIC around the case of Aware Super at a hearing of the committee in March, where commissioner Danielle Press said the appropriateness of the fund’s apparent use of member reserves to pay remediation costs was “a matter for APRA”.
In response to Mr Falinski’s question on notice, APRA said the case concerned “the payment of remediation to members by StatePlus rather than payment of a fine imposed by a regulator”.
StatePlus, which was purchased by Aware Super in 2016, had undertaken “a process to identify affected members relating to its fee-for-no service issues”, APRA said.
“Once identified, these members were remediated by StatePlus with the funding for the payment being sourced from StatePlus’ retained profits, i.e. its own financial resources,” the regulator said.
“We are unaware of any fines having been imposed on StatePlus or Aware Super that were paid for by Aware Super, whether through the exercise of any right of indemnification from the fund or otherwise.”
The prudential regulator sought to draw a distinction between a fine and remediation in the case, arguing that StatePlus had sought to correct “an error” rather than having been found to have breached its obligations.
“In general terms, a fine is imposed on a regulated entity by a regulator in relation to a breach of a law,” APRA said.
“Remediation however broadly refers to a payment made to address any loss suffered by a member as a result of an error or other failure that occurs, including from an external event) in the course of operating a fund.”
However, APRA further noted that ASIC was currently pursuing civil penalties against StatePlus as a result of fees for no service over a five-year period, and that the matter was “ongoing”.
One word for this nonsense…..Semantics.
So paid from retained profits means either they fudged net returns to ALL members or increased their investment fees. Either way, ALL members paid as there is no such thing as shareholders equity in these type of funds and we all know about the promissory notes debacle to buy StatePlus again a cost to ALL members. I’d bet my bottom dollar it didnt come out of bonuses or executive salaries as they heavily cut staff planners numbers at StatePlus. Tell the truth AwareSuper.
Of you fine AMP they send the bill to the planner, even though planner was acting and following instructions amp imposed as the licencee. That is a massive difference to the shareholder paying.
AwareSuper – should be called BeAwareSuper. I would not go near them.
AwareSuper CEO: “Quick issue press release saying it’s dodgy evil planners not servicing clients” Step 2 call for higher education standards…step 3 ring up FPA and tell them we’ll withdraw from the Professional Partner Program if they don’t also call for higher education standards….. worked for CBA…
[i]”Hey Mr Consumer would you like to invest in a Conservative Fund….my boss in pressuring me to flog these funds. Apparently they purchase corporate bonds issued by First State Super to buy StatePlus and we’ll write them off within two years..””.[/i]
Can see a big “slap on the wrist” coming here, and everyone will keep their careers in tact – not so for an adviser who might forget to upload some research etc……
Yes, in almost all cases, the big end of town gets away scot-free for disgraceful criminal conduct whereas the small operator gets hammered. Unfortunately, this is being perpetuated right now with what we see at CBA, AMP, and IOOF. The executives will never go to jail for putting in place systemic theft, whereas anyone else would get nailed.
Scott Free…I think I went to school with him….
Not to be confused with the other Scott….
Great Scotts….
ohhh, the barefoot “guru” idiot! yes
Maybe they should ring up the unions the Industry Super Funds paid money to & ask for refund to pay APRA instead. And maybe the millions of default super fund members should request a refund of all the intra-fund “advice” fees they have paid over the past decade (for no service). Just appalling.
Let’s not forget whose disgraceful, systemically corrupt and criminal conduct it was that brought all this down on the industry in the first place. It’s all well and good to have a chop at the Industry Funds, they deserve it in many cases, but it was the banks and AMP, and their casually criminal business practices (believing the LNP would run cover for them indefinitely) that brought this on. If advisers should be blaming anyone, it is them.
And ourselves as co-conspirators and beneficiaries. Being an adviser for many big firms was a sweet life.
Good pickup by the journalist. Fines were not paid by members. Were remediation costs paid by members, though? I couldn’t get clarity from the article.
Agreed. Completely unclear. I’m totally lost after reading it! Did they do something criminal or not?
Seems to me the regulator is taking the line like this…. the staff have paid themselves with members money and then done nothing which is “Fees for no Service”. So in order that the members are paid back for this money that was taken from them in the first place, more money has been taken from the members to repay the initial amount of money taken from the members for “Fee for no Service”. Good, we all keeping up here?
As this is an Industry Super Fund, the staff who took the money were related to the fund, it appears to be all OK and no crime committed and no money to be taken from them.
End result, staff kept the money taken from members for “fees for no service” and members paid themselves back with more money taken from members to repay the members – and all staff paid I guess to work out the amounts.
Could be wrong?
spot on but you missed the part about issuing corporate bonds to pay for this too…and charging management fees. Some creative Accounting 101.