On Friday (20 September), Federal Court judge Jayne Jagot dismissed APRA’s efforts to ban former IOOF CEO Chris Kelaher and other executives from the group.
In her judgement, Ms Jagot said the prudential regulator simply did not have enough proof that the IOOF directors contravened the Superannuation Industry Supervision Act (SIS Act) by failing to act in the best interests of members.
Ms Jagot called APRA’s argument “unpersuasive” and shows “systemic weakness”. IOOF welcomed the decision by the Federal Court.
“The court held that IOOF’s APRA-regulated entities and the five individuals did not contravene the Superannuation Industry (Supervision) Act 1993 (Cth). The court also declined to make the disqualification orders sought against the five individuals, and awarded costs in IOOF’s favour,” the company said in a trading update.
Mr Kelaher and chairman George Venardos stepped down from their roles after APRA launched the legal action and disqualification proceedings against the wealth giant in December last year.
APRA deputy chair Helen Rowell said that she was “disappointed with the decision” but noted that the case examined a range of legal questions relating to superannuation law and regulation that had not previously been tested in court, relating to the management of conflicts of interest, the appropriate use of super funds’ general reserves and the need to put members’ interests above any competing priorities.
“Litigation outcomes are inherently unpredictable, however APRA remains prepared to launch court action – where appropriate – when entities breach the law or fail to act in an open and cooperative manner. APRA still believes this was an important case to pursue given the nature, seriousness and number of potential contraventions APRA had identified with IOOF,” Ms Rowell said.
Additional licence conditions that APRA imposed on IOOF in December are unaffected by today’s judgment and remain in force.
Despite the decision, Ms Rowell said APRA’s tougher approach to enforcement had led to IOOF being better placed to deliver sound, value-for-money outcomes for its members.
“APRA has seen significant improvement in the level of cooperation from IOOF since this case was launched. Additionally, the new licence conditions have enhanced IOOF’s organisational structure and governance, including the role and independence of the trustee board within the IOOF group. This will better support effective identification and management of future conflicts of interest,” she said.
APRA’s defeat comes after ASIC lost its landmark responsible lending case to Westpac last month. Both regulators were slammed by the royal commission for failing to litigate against major financial institutions.
On the day prior to IOOF’s victory in court, APRA chairman Wayne Byres emphasised the regulator’s tougher stance against super funds and explained how APRA would be taking a more aggressive approach.
IOOF shares rallied by more than 8 per cent on Friday to hit a four-month high of $6.
This stuff up is a direct result of the theatre of the Hayne hearings – APRA ( and ASIC) copping a caning, and Mr Kellaher”s Ken Henry like performance at his hearing. Judge says APRA did not get the actual evidence required, merely relied on Mr K ‘s attitude and allegations from SC.
Meanwhile APRA, because of its under-the-counter regulatory style, is giving the impression it does not care if LIF ( and for that matter, FASEA) are responsible for reducing genuine NEW RISK BUSINESS to life offices. Capital adequacy and solvency anyone?
To use Hayne’s definition, APRA and ASIC (and the TPB, for that matter) are now my servants, as I pay them directly. I am not getting value for the fee they are charging me – this is especially egregious since there is no “Opt-In” on their fees. The regulators are therefore guilty of fee for no service. Not to mention that they have destroyed investor value in these listed companies, for no tangible net benefit.
Send Hayne the bill.
[quote=Anonymous]does anyone have an update on asic v dover ? [/quote][quote=Anonymous]does anyone have an update on asic v dover ? [/quote]
terry may win.
does anyone have an update on asic v dover ?
I think that some folk affected might take civil action against APRA
“Both regulators were slammed by the royal commission for failing to litigate against major financial institutions”
Is it a conflict of interest for Lawyers to chastise regulators for not litigating enough?
Can we start to acknowledge the inherent conflict of interest from the RC itself and review the logic behind the recommendations?
So we have a regulator now prepared to launch court action where appropriate to test the law. So they clearly don’t know the law themselves but are will to test it post RC smack down. So who pays for this farce? Yep you guessed it, the members who get slugged the ever increasing annual APRA levy
APRA should be focused on CBA ANZ AMP there are multiple conflicts of interest over charges in fees according to the Royal Commission typically these regulators only go for the small Gus because they think they can bully them Some people in APRA should be made accountable for their poor judgement
Great news for IOOF and the financial planning industry.
Do they lose on purpose?
So we have a Royal Commission where old man chompers drags the industry over the coals, then when they get taken to Federal Court, ASIC (and APRA) get there arses handed to them….