Shares in IOOF Holdings were hammered on Friday after APRA, the banking and insurance regulator shocked the market with moves to disqualify the troubled wealth manager’s top executives and impose new, restrictive license conditions.
The wealth group’s shares lost more than 36% of their value at one stage as investors sold and bolted from the stock.
IOOF joins AMP and Freedom Insurance Group among the early and substantial victims of the Royal Commission’s disclosures.
The shares in the big four banks have also been whacked, but none to the extent of IOOF, AMP and Freedom.
APRA’s surprise announcement Friday morning revealed that it is seeking to disqualify five senior executives and directors of IOOF, including the managing director and chairman, for failing to act in the best interests of pension fund members.
APRA is alleging CEO Chris Kelaher, chair, George Venardos and chief legal counsel Gary Riorden are not fit and proper people to be running a superannuation company.
APRA made the same allegations against IOOF chief financial officer David Coulter and company secretary Paul Vine, according to court documents filed in the Federal Court and Friday’s statement.
If successful, APRA says the disqualification proceedings would prohibit the above individuals from being or acting as a responsible person of a trustee of a superannuation entity.
The move could threaten to derail IOOF’s $975 million purchase of ANZ’s financial planning businesses.
“Given the significance of APRA’s action, we will assess the various options available to us while we seek urgent information from both IOOF and APRA,” ANZ deputy chief executive Alexis George said in a separate statement to the ASX.
APRA said it is also seeking to impose additional licence obligations on IOOF, which it accuses of failing to address a series of conflicts of interests it has consistently raised with the firm since 2015.
These include compensating members for losses caused by service providers owned by IOOF from their own pension funds general reserves, rather than from the trustees’ own funds or third party compensation.
In a statement to the ASX, IOOF said it believed the allegations were “misconceived” and the company and its executives would “vigorously defend” the proceedings. That statement had the ring of defiance of a company in denial.
“APRA’s efforts to resolve its concerns with IOOF have been frustrated by a disappointing level of acceptance and responsiveness,” APRA deputy chair Helen Rowell said in a statement (https://www.apra.gov.au/media-centre/media-releases/apra-takes-action-against-ioof-failing-act-best-interests-superannuation).
“Furthermore, the individuals included in the proceedings have shown a lack of understanding of their personal and trustee obligations under the SIS Act and at law, and a lack of contrition in relation to the breaches of the SIS Act identified by APRA,” she said.
According to the court documents, APRA has issued show cause notices setting out APRA’s intention to direct IOOF’s super arm, IOOF Investment Management Ltd (IIML), to comply with its Registrable Superannuation Entity Licence and impose additional conditions on the licences of IIML, Australian Executor Trustees Ltd and IOOF Ltd.
The company must respond to APRA’s show cause notice within 14 days.
