IOOF paid super members with their own savings — APRA moved to disqualify its bosses

On 7 December 2018 the Australian Prudential Regulation Authority took IOOF — one of Australia's largest listed wealth managers, with about 500,000 customers and $126 billion in members' funds — to the Federal Court, seeking to disqualify managing director Chris Kelaher and four senior executives: chair George Venardos, CFO David Coulter, company secretary Paul Vine and general counsel Gary Riordan. APRA said there was a reasonable basis to conclude IOOF and its licensees IIML and Questor Financial Services breached the SIS Act and failed prudential standards.

The allegation that stuck came out of the banking royal commission: IOOF had made an accounting error and decided to compensate affected super members — but instead of using its own corporate resources, it took the money out of the very superannuation funds it trustees. Counsel assisting Michael Hodge QC accused the company of using members' money to compensate them for the company's own mistake; asked whether members had ever complained, Kelaher agreed they couldn't — because they didn't know what Questor was doing. IOOF's answer was that the scheme met the 'pub test'.

Investors delivered the immediate verdict: the stock plunged 35.4 per cent to $4.62, its lowest in nine years, erasing about $900 million in hours. APRA deputy chair Helen Rowell said the regulator had worked with IOOF for years but found it 'necessary to take stronger action' after 'a disappointing level of acceptance and responsiveness'. The action also jeopardised IOOF's $975 million deal to buy ANZ's OnePath pensions business, with ANZ seeking urgent information. IOOF vowed to 'vigorously' defend the case.

IOOF treated member retirement accounts as its own remediation fund: an accounting error the company made was paid for by the very people it owed a duty to protect.

Years of regulator engagement produced no fix — APRA cited 'a disappointing level of acceptance and responsiveness', so it escalated from persuasion to court and disqualification proceedings.

The 'pub test' and the absence of complaints were offered as defences, though members could not complain about arrangements they were never told about.

Management concentrated the risk at the top: APRA sought to bar the managing director, chair, CFO, company secretary and general counsel from running superannuation entities.

Remediation paid from the victims' own pockets is not remediation — covering mistakes with beneficiary money turns an error into a breach and invites the regulator to remove the people responsible.

IOOF called the action disappointing and promised to vigorously defend it, saying the historical matters had been disclosed to APRA years earlier and were already addressed or being addressed. ANZ — which had agreed in October 2017 to sell its OnePath pensions and investments businesses to IOOF for $975 million — said it would assess its options while seeking urgent information. The proceedings landed in the wake of the banking royal commission, which had heard the compensation-scheme evidence that August. The source article covers the action as filed and reports no final court outcome.