Clik here to view.
APRA caves in to IOOF’s demand for more time
Australian Financial Review 01 Jan 2019 11:00 PM
James Frost
The Australian Prudential Regulation Authority has buckled to IOOF's demand for more time to unwind its controversial dual structure, giving the diversified financial services firm an additional six months to fix an issue it first raised in 2015.
IOOF operates a structure where the superannuation and investment management business are run under the one umbrella, which can lead to conflicts when the interests of the shareholders are prioritised over the interests of super fund members.
APRA lost its patience with IOOF on September 4, 2018, when it was forced to perform a secret and emergency downgrade of its risk rating, leaving the company one step away from a forced restructure.
In the same September letter, APRA's executive general manager, Mark Adams, set out a list changes IOOF needed to implement with corresponding due dates. At the very top of the list was the demand that IOOF separate the two roles by June 30, 2019.
At 6.01pm on the Friday before Christmas, however, IOOF would publish an announcement on the ASX that included extending until December 31, 2019, the deadline for splitting the RSE Licence (registrable superannuation entity) and the RE Licence (responsible entity).
The announcement implies the date has been extended to accommodate IOOF's acquisition of ANZ's Pensions and Investments business, which was announced in October 2017 but has not been completed. APRA and IOOF were approached for comment but did not respond before deadline.
Cache of documents
The September letter was part of a cache of documents released by the royal commission that contained APRA's original Managed Action Plan spelling out the minimum standards it expected IOOF to achieve. Among the documents was a Project Management Status report from IOOF which APRA expects the company to submit fortnightly.
The Project Management Status report reveals that IOOF has already blown multiple deadlines set by the regulator including the appointment of a head of regulatory risk. APRA asked IOOF to appoint a suitable candidate to the role by October 1, but IOOF's appointed executive did not begin until November 7.
The document also shows that IOOF's first Project Management Status Report was not submitted until November 2, or eight weeks after the demand for regular fortnightly updates was first made.
Explosive development
The billion-dollar transaction to buy ANZ's investments business was questioned following IOOF CEO Chris Kelaher's appearance at the Hayne royal commission where he said the dual structure was "de rigueur 10 years ago" and he was indifferent to whether it was amended.
Subsequent to the appearance at the royal commission and the September 4 letter, APRA moved to disqualify Mr Kelaher, IOOF chairman George Verandos and three other executives from running a superannuation business in an explosive development on December 7.
The move represents the first time APRA has sought to disqualify a director from acting as a superannuation trustee since 2013 when it pursued the directors of Trio Capital over what has been described as Australia's largest superannuation fraud.
ANZ's deputy CEO and group executive wealth Australia, Alexis George, said the bank was seeking "urgent information" from IOOF following news of the move to disqualify the directors and there were options available to ANZ that did not include IOOF.
The trustees of OnePath Custodians will need to consider whether the transaction is in the best interests of its members when they vote on allowing the transaction to proceed in February. OnePath Custodians met on December 13 but the issue was not put to a vote.