Banking royal commission: Kenneth Hayne slams IOOF secrecy bid

Kenneth Hayne has slammed IOOF over its ‘ill based’ attempt to keep documents secret.

Commissioner Kenneth Hayne. Picture: Eddie Jim/The Age

Royal commissioner Kenneth Hayne has slammed the wealth manager IOOF over its “ill based” attempt to hide secret documents detailing discussions between regulators and its subsidiary Questor Financial Services.

It’s the first time the former High Court judge published a ruling on an application to prevent documents from being made public during the royal commission, in the process demolishing the repeatedly tardy behaviour of Questor’s lawyers and providing an indication of the explosive revelations to be revealed over the coming fortnight.

The royal commission late yesterday released an updated list of people and organisations likely to have an interest in hearings that begin on Monday and will probe potential misconduct by the guardians of the nation’s $2.6 trillion pool of superannuation savings.

Westpac, which was the only major bank to escape inclusion in the royal commission’s list of case studies, has now had its name added to orders granting leave to appear at the commission, allowing it to cross-examine witnesses and make submissions on what findings Mr Hayne should reach.

The lobby group for the union-and-employer-backed industry fund sector, Industry Super Australia, has also been listed.

IOOF, a financial advice major, was already listed as a case study to be examined over the fortnight’s hearings.

The royal commission yesterday published its reasons for throwing out a bid Questor, which was a super fund trustee, to keep secret details in board documents from being aired at the hearings. IOOF’s lawyers King & Wood Mallesons argued that information in the documents was subject to legal professional privilege.

Mr Hayne said “the claims for privilege appeared large”.

“I reject many of the claims that were made,” he said.

“Many of the documents in respect of which privilege is claimed are not documents that record or refer to communications made for the dominant purpose of IOOF or Questor obtaining legal advice; they do not record or refer to communications of that kind; and, they are not documents created for the dominant purpose of obtaining legal advice.

“Some of the documents do no more than record or constitute communications with APRA, ASIC or the Australian Taxation Office.

“Some of them do no more than record particular governance and compliance issues that had arisen without any expression of, or record concerning, any legal advice about or legal characterisation of those events.”

Questor was a vehicle through which former IOOF head of advice research Peter Hilton was accused of “front- running” — trading in securities ahead of issuing a report on the company involved in the hope of profiting from a movement in the stock.

The allegations were examined by PwC in a 2015 report, later tabled in federal parliament. In it, PwC said that on the information available it could not identify any frontrunning by Mr Hilton.

However, it pointed out it did not have the “opportunity to review Questor records against trades” allegedly made by Mr Hilton. It suggested these records should be investigated to “identify any potential instances of [Mr Hilton] personally trading in securities for which he was concurrently investing in using Questor funds which may have impacted on the value of his holdings”.

IOOF appears to have wound down Questor following the controversy. It transferred responsibility for looking after an investment portfolio product elsewhere in the corporate group in June 2016 and the Australian Securities & Investments Commission revoked its financial services licence in May last year. It is not clear whether IOOF asked for the licence to be withdrawn.

In his ruling, Mr Hayne also slammed KWM for failing to produce the documents on time.

KWM initially told the royal commission it had complied with the inquiry’s requests for notices to produce documents, which included board papers for meetings since 2011.

However, solicitors working for the royal commission discovered supporting papers for Questor’s board meetings for meetings after 2014 were not handed over to the royal commission.

After questioning as to where the missing papers were, Questor’s lawyers later wrote that they suffered a “technical error” in providing the documents and pledged to hand them over.

When the lawyers did hand over the documents, IOOF was said to make a claim of privilege to parts of the papers and that an affidavit would be provided the next day. After that affidavit never arrived, the royal commission again asked Questor’s lawyers for further information.

“Delays of the kind that have occurred in this case impede the proper work of the commission,” Mr Hayne said.

“Ill-based claims for privilege further impede its work.”

IOOF will appear alongside 13 other retail and industry superannuation managers over a fortnight of hearings starting on August 6 that could air some of the most explosive proceedings yet at the royal commission.

Australia’s biggest for-profit super manager, AMP, and the nation’s largest fund, AustralianSuper, have been called up to face a grilling, as managers of the country’s $2.6 trillion pool of retirement savings face the most forensic examination of their conduct in two decades.