The prudential regulator has agreed to accept a court enforceable undertaking from OnePath Custodians (OPC) to rectify compliance deficiencies and compensate members.
It has also issued infringement notices totalling $10.7 million in regard to alleged breaches by OPC of the Superannuation Industry (Supervision) Act 1993 for failing to invest members’ default superannuation contributions in MySuper products.
This amount is in addition to the $1.5 million paid by OPC in June 2023 for similar conduct.
“This action shows that APRA is willing to take strong enforcement action where it is warranted,” said Australian Prudential Regulation Authority (APRA) deputy chair Margaret Cole.
“These MySuper changes came into effect 10 years ago. Our patience for entities who are still struggling with foundational issues, with the potential for serious impact to members, has run out.”
She noted OPC is one of four superannuation trustees owned by Insignia Financial Ltd, formerly IOOF Holdings Limited, and is one of the superannuation industry’s largest participants.
“APRA expects a commensurately high standard of governance and risk management,” Cole said.
“We expect trustees to adhere to the law and to have robust governance, compliance and risk management frameworks embedded and operationalised to prevent, detect and swiftly remediate potential breaches of their obligations.”
OPC has approximately 700,000 members and over $37 billion in funds under management.
Previously, APRA applied additional licence conditions on OPC and other trustees of various superannuation funds within the Insignia group in November 2022 to address governance, accountability and risk management deficiencies within the Insignia group.
According to the regulator, it intended to ensure OPC would identify and compensate any members who suffered financial losses arising out of a breach of a previous APRA direction issued in December 2021.
“APRA has been closely monitoring OPC which has continued to identify further members who may have been adversely impacted by failures to direct default member contributions to a MySuper product. This has unearthed many alleged breaches of section 29WA of the SIS Act,” the regulator said.
“While OPC has engaged an independent expert and remediated a significant number of affected members since 2022, APRA is highly concerned that new cohorts of members continue to be identified.
“APRA is concerned that OPC’s ongoing alleged failures to adequately implement the MySuper provisions is indicative of various ongoing cultural and governance failures within the organisation.”
With the court enforcement undertaking, OPC has committed to:
- Identify, rectify, and remediate all members adversely affected by the breaches with input from an independent expert.
- Allocate additional resources to replenish the Operational Risk Financial Requirement to 100 per cent of the target balance of 0.25 per cent of funds under management.
- Hold $40 million of its existing Operational Risk Financial Requirement assets as an overlay until OPC has satisfied the terms of the CEU.
In a statement, a spokesperson for OnePath Custodian confirmed APRA has accepted its enforceable undertaking “in relation to accrued default amount and default superannuation contribution issues”.
“OPC acknowledges APRA’s concerns as set out in that undertaking and will complete various steps including the engagement of an expert to review remediation and rectification work,” they said, adding that the enforceable undertaking and payment of the infringement notices “resolves APRA’s concerns on these issues”.
OPC “remains committed to the ongoing work to uplift its governance”, the spokesperson said.
Payment of an infringement notice is not an admission of guilt or liability.
In its quarterly update to the ASX on Monday, Insignia noted that $23 million of the additional $135 million it has put aside for remediation provisions relates to the OPC enforceable undertaking.
Insignia Financial chief executive Scott Hartley said: “Disappointingly, we have had to take up a further provision to address a significant increase in remediation for legacy quality of advice and product compliance issues. We acknowledge the impact these historic remediation programs have had on shareholders; however, it is important that clients are fully remediated.
“Importantly, we expect this is our final provision increase related to the legacy advice remediation program which is now substantially complete, and that funding the advice and product remediation increases announced today will not require a capital raise from shareholders.
“Looking forward, the operating model changes announced earlier this month will provide clear lines of accountability enhancing our focus on improved risk governance and management, driving profitable growth and enabling each of our businesses to focus on competing in their respective markets.”
