“The media reports over the weekend regarding IOOF contain serious allegations of misconduct. I am aware that ASIC is investigating this matter,” Mr Frydenberg told ifa yesterday.
Over the weekend, Fairfax reported a number of improper practices, including insider trading and front running at the financial giant.
ASIC has confirmed that it is investigating IOOF and noted that “licensees have an obligation to report significant
breaches and market participants have an obligation to report information which may raise a warning signal of market misconduct”.
Despite the “seriousness” of the allegations, Mr Frydenberg would not be drawn on the potential for a royal commission, saying that “it was not appropriate to comment further while investigations were underway”.
Nationals Senator John Williams said the claims about IOOF “put more weight” behind the need for a royal commission into the financial services industry.
“It’s very concerning to hear what is going on – accusations of insider trading and cheating exams. My biggest concern is these products that they are out there selling, are they up to standard?” he asked.
The failure of the corporate watchdog combined with an industry not prepared to change its culture was behind the IOOF misconduct scandal, according to Labor Senator Sam Dastyari.
“Frankly, if the regulator did what it was supposed to do, a royal commission would not be needed,” he told ifa.
“The combination of failed regulation and a failure of the industry to change its culture has led to these calls, and we have a government that has remained conspicuously silent despite these repeated shortcomings. Hopefully this time will be different, but I have learned not to hold my breath.”
Mr Frydenberg responded and said he would be making no comments while the ASIC investigation was taking place.
“I suggest that Senator Dastyari take this into account and do the same,” he said.
Yesterday, IOOF shares plunged by 15 per cent, although Morningstar said it still had faith in the financial services company.
“At this stage, we make no changes to any key data points and after the sharp sell-off, believe IOOF is undervalued,” the research house said.
“As long as IOOF maintains a strong compliance track record and takes appropriate remedial action when necessary, this should not have a material impact on the business.”
IOOF has so far rebuffed claims that it had failed to notify the regulator of any misconduct.
“All the issues raised, historic or recent, have been dealt with appropriately at the time. This includes, where relevant, through internal and board review, notifying industry regulators, ongoing review of compliance measures and controls, employee education and independent investigations,” an IOOF spokesperson said.
[quote name=”Matthew Ross”]What Dan said…
1. Product manufacturers should not be able to own advice businesses.
No idea why we tolerate this. This link is continuously drag us down. For every step positive stories Melinda generates for us, these stories will kick us back four because negative stories will always be given more attention – Adele hasn’t won all her awards on the back of ‘feel good’ stories.
We’re never going to win at this rate.[/quote]
I’m not saying I agree or disagree, but I am curious:
What has the integrated model of product and advice got to do with the topic of 2-3 IOOF staff over 17+ years acting in an inappropriate manner?
I have yet to see anything on how the issue relates to advisers, products, advice, or impacts clients at all.
I have strong views on my favorite football team, but realise this isn’t the place to promote such views, as the article isn’t about football.
Linking the actions of 2 staff from 7 and 17 years ago to the issue of integrated advice is a very looong bow to draw.
I appreciate you have a stance on integrated ownership, but it really should be kept to relevant articles, and comments should be related to the actual topic on hand.
What Gerry said…but sooner.
In a perfect world Matthew, yes.
I don’t think as a whole we’re ready for it yet. No decent compensation scheme, a regulator with no foresight or direction. There needs to be higher barriers to entry, like now. Once these things are in place than we can talk about separating product from advice…and then we’ll see real competition in the product space. A win for advisers and consumers.
What Dan said…
1. Product manufacturers should not be able to own advice businesses.
No idea why we tolerate this. This link is continuously drag us down. For every step positive stories Melinda generates for us, these stories will kick us back four because negative stories will always be given more attention – Adele hasn’t won all her awards on the back of ‘feel good’ stories.
We’re never going to win at this rate.
[quote name=”Separation”]Teddy I’m glad you pretty much agree with me. However It has nothing to do with the number of staff or incidents but that reporting of breaches is one of the most basic rules and indication of a possible cultural issue within the business hence why I say incompetence….[/quote]
Regarding the reporting of breaches – one that leaps to mind is the insider trading in 2009. Adele points out that “ASIC were not notified of the insider trading. As per regulation 238, all incidences or suspicions of insider trading must be reported to ASIC”.
What she ‘forgot’ to mention is that this regulation came into effect in August 2010. Prior to then ASX were the ‘police’ and different regulations existed.
So yeah – they didn’t report the 2009 incident to an irrelevant body in ASIC.
Has Adele lied? She is correct that IOOF didn’t report to ASIC in 2009, and she stated correctly that CURRENT legislation is to report to ASIC… but her intent is to deceive.
Teddy I’m glad you pretty much agree with me. However It has nothing to do with the number of staff or incidents but that reporting of breaches is one of the most basic rules and indication of a possible cultural issue within the business hence why I say incompetence. The biggest issue here is that advisers not be tainted by errors made by an institution that should have know better. Equally we don’t need other institutions being splashed with mud from what one business did.
[quote name=”Separation”]Perhaps everyone ( journalist, pokies, commenters ) need to separate what the IOOF story is. It’s about institutional incompentence not industry culture. I think more could be gained in terms of positive message for an industry under siege by making this clear.[/quote]
Institutional incompetence? 3 separate issues regarding 2 staff over a 17 year period, in an organisation of several thousand employees.
Show me a large organisation that has NEVER had an issue with ANY staff at all – no warnings, no behavioural issues, no lateness, no errors, no misdemeanours etc.
But yeah, Adele and some others have drawn a stupidly LOOONG bow to suggest the isolated actions of 2 staff over 17 years at one large organisation to suggest the entire culture and industry and vertical integrated model and all of financial advice (the issues with the staff had nothing to do with financial advice, or affected clients) is corrupt and flawed and scandal ridden.
Perhaps everyone ( journalist, pokies, commenters ) need to separate what the IOOF story is. It’s about institutional incompentence not industry culture. I think more could be gained in terms of positive message for an industry under siege by making this clear.
[quote name=”Spud”][quote name=”chris”] Not one client has lost a penny as a result of inacurate unit pricing ( something that is not unusual in the industry ) . I would also hazard a guess that insider trading is a no go zone in all major institutions .
I believe in this instance the accused was telling famiuly to buy stocks before making the recommendation to clients. Then instructing family to sell the stocks after clients had purchased the stock. That does impact clients.[/quote]
You are surmising just like the reporter, There was a different person in the drivers seat at that point in time
Wouldn’t it be great to have some of the positive advice stories shared to balance out the negative stories?
Wouldn’t it be great to be able to show consumers what good advice actually looks like?
Wouldn’t it be great to promote quality advice?
#PerceptionCorrection
http://www.positivityforplanners.com….
A Royal Commission will only tell us what we already know or are already trying to ignore.
I think Dan makes a brutal but true comment – the industry is corrupt but not through necessarily bad people but a flawed childhood and teenage years. Also how do you unscramble an egg? You can’t, you have to throw it out and start again again. That’s easy if we are only talking eggs but damn difficult if we are talking the lives of small business people and their employees – I’m talking about the advisers. That said we need to stop talking like victims and do something different.
Dan may be right that product manufacturers should not own licensees but frankly that would be difficult to unwind. But there is no reason why advisers should not be more constructively rebellious against their institutional owned licensees and drive more independence. Manufacturers are nothing without advisers but the current model doesn’t normally show this.
Plenty of evidence that finanicial institutions need close monitoring. Unions are small bickies. They didn’t cause the GFC. This government is too close to big money that’s why it’s cut ASICs budget. The union bashing Royal Commission is costing taxpayers $80 miliion. It’s a stunt. To be serious it would need to be examining the employers as well.
[quote name=”chris”] Not one client has lost a penny as a result of inacurate unit pricing ( something that is not unusual in the industry ) . I would also hazard a guess that insider trading is a no go zone in all major institutions .
I believe in this instance the accused was telling famiuly to buy stocks before making the recommendation to clients. Then instructing family to sell the stocks after clients had purchased the stock. That does impact clients.
I think the Arabic proverb sums this situation quite nicely, “Believe half of what you see and nothing of what you hear”. The stockbroker quote is also quite useful, “Buy on rumour, sell on fact”. Another reporter trying to drain the last drops of blood out of the troubled financial services industry. Is it too wishful of me to think that one day they’ll report the news instead of trying to create it?
When a reporter makes unsubstantiated claims against a listed financial services company , said claims being driven by a former disgruntled employee , ASIC should investigate the reporter , as her reporting has had a major impact on the value of IOOF shares . Not one client has lost a penny as a result of inacurate unit pricing ( something that is not unusual in the industry ) . I would also hazard a guess that insider trading is a no go zone in all major institutions . When discovered , the perps are usually shown the door quick smart . Yet the person mentioned in the article is on paid leave , which he might as well stay on , as his reputation has surely been trashed . I hope the guy gets a really good lawyer and sues Fairfax and the reporter for plenty .The reporter in question has run a vendetta agains the industry for a year now . Time to take of the gloves
The industry is eating itself from the inside out. A royal commission will only confirm what we already know, the industry is structurally corrupt, but how do you unscramble an egg.
Two schools of thought… 1. Product manufacturers should not be able to own advice businesses; OR 2. Call every adviser that is tied to institutional ownership an ‘Agent’. If nothing else at least people have a clearer idea of what they are walking into.
Labor = Unions = corruption allegations at the highest levels. Think little Sammy should shut up about Royal Commissions…
Lets be clear Sam Dastyari has a deep interest in removing any competition to the industry funds, because they and he know better, its a storm in a tea cup – yes there are concerns but more or less than in every other walk of business life and certainly better than public business – what justification is there for paying $600m and probably more for building nothing, thanks Dan – only a left leaning politician would do such despicable thing that erodes personal wealth by stealth – Sam you are pathetic