APRA to pursue super referrals

The Australian 12:00am February 22, 2019

Michael Roddan

The prudential regulator will pursue 12 referrals of misconduct in the $2.8 trillion superannuation industry from Kenneth Hayne’s royal commission although there is no likelihood of civil or criminal penalties, as any potential guilty findings will allow the watchdog to use its ­directions power to overhaul rogue super funds.

The Morrison government last week attached civil penalties to superannuation trustee breaches of directors’ covenants or obligations. However, it was not extended retrospectively, as Labor has proposed, amid concerns from Treasury that doing so would be a breach of human rights.

The legislation also failed to be passed by the House of Representatives this week, so will now be unlikely to pass into law until April.

While court action will not result in penalties, an adverse finding for a super fund could allow the Australian Prudential Regulation Authority to use its long-awaited directions power — to be legislated as soon as today by the parliament — to force funds to overhaul their practices or exit the industry.

“I note that none of the ­potential breaches of the law or prudential standards that have been referred to APRA carry civil or criminal penalty provisions directly, although other avenues to impose sanctions may be available depending on the specific circumstances,” APRA chairman Wayne Byres said.

When asked whether APRA had involvement in the ousting of National Australia Bank chairman Ken Henry and chief executive Andrew Thorburn, after they were singled out by the royal commission over their perceived inability to overhaul culture in the bank, Mr Byres said: “I don’t want to get into commenting on individual organisations.”

While APRA did not name the funds it is investigating, it has already launched court action against wealth manager IOOF and its senior executives for failing to act in the best interests of super members. Other super funds that copped adverse findings in the royal commission include NAB’s division NULIS, Commonwealth Bank’s Colonial First State and beleaguered wealth manager AMP.

“We have now written to all those organisations informing them we are doing an investigation,” APRA member John Lonsdale said.

“We are asking them for information. We are seeking independent legal advice, whether with this information a case exists to prosecute and go to court. We’ve established a new committee focused on resolution and enforcement.”

Mr Lonsdale, who was recently appointed to APRA to conduct an enforcement review of the regulator, said the watchdog now had an “increased appetite to take on coercive tools” in order to keep intransigent funds in line. He said he would finish his review next month. APRA also faces a wholesale capability review, led by former regulator Graeme Samuel.