Banking royal commission rejects IOOF secrecy bid

The banking royal commissioner has slammed wealth manager IOOF for an “ill-based” attempt to keep documents secret.

Kenneth Hayne said: “Delays of the kind that have occurred in this case impede the proper work of the commission.” Pic: pool

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

The royal commission today published its reasons for ruling against Questor’s application to keep details in certain documents from being made public. Questor argued the information contained in the requested documents was subject to legal professional privilege.

In the reasoning, Mr Hayne said that King and Wood Mallesons, the lawyers working on behalf of Questor and other entities in the IOOF group, had told the royal commission they had completely 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 inquiry.

After questioning as to where the missing papers were, Questor’s lawyers later wrote that they had encountered 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. When that affidavit never arrived, the royal commission against asked Questor’s lawyers for further information.

“The claims for privilege appeared large,” Mr Hayne said, noting that he inspected the documents to decide whether to accept or reject the application for privilege.

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

“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,” Mr Hayne said.

“Prompt and proper compliance with notices to produce is required by law and is essential to the proper execution of the commission’s work. Delays of the kind that have occurred in this case impede the proper work of the commission. Ill-based claims for privilege further impede its work.”

Financial advice powerhouse IOOF will appear alongside 13 other retail and industry superannuation managers over a fortnight of hearings starting on August 6. The hearings are expected to air some of the most explosive proceedings yet at the banking and financial services royal commission.

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

The competence of Australia’s financial regulators will also be probed, with the Australian Prudential Regulation Authority to be put on the stand for the first time during the royal commission after it faced intense and escalating criticism over its failures to safeguard the country’s nest eggs from fee-gouging and dismal returns.

The Productivity Commission’s draft report into the super system, which found entrenched overcharging and underperformance in the for-profit fund sector, and a trail of underperforming trade union funds that refuse to merge despite it being in their members’ best interests, has been informing the Hayne inquiry.

Under the law, superannuation trustees in charge of managing the retirement savings of members must act in the best interests of their members. However, for-profit companies listed on the stockmarket, such as AMP and the Big Four banks, also have a fiduciary duty to act in their shareholders’ best interests. The latest data from SuperRatings shows super funds run by CBA, ANZ, NAB, Westpac, AMP and IOOF — another large retail super manager — were consistently among the worst performers over the past 15 years.

Retail fund fees have been twice as high as non-profit industry fund fees. Meanwhile, retail super providers have grossly underperformed in investment returns.