APRA and IOOF in July Federal Court showdown

The banking regulator and IOOF look set to face off in the Federal Court in July.

IOOF’s Chris Kelaher, who has stood aside as chief executive. Picture: Hollie Adams

The banking regulator and its legal opponent IOOF will face off in the Federal Court in July if a timetable which has a bearing on the careers of five individuals, ­including stood aside chief executive Chris Kelaher, is adhered to.

Federal Court judge Jayne Jagot has set aside three weeks from July 1 in Sydney for the ­matter to be heard, following a case management hearing on March 19.

Earlier this month the Australian Prudential Regulation Authority began legal action alleging Mr Kelaher, IOOF chairman George Venardos, finance boss David Coulter, company secretary Paul Vine and general counsel Gary Riordan were not fit and proper people to run a superannuation company.

APRA is seeking banning ­orders on the individuals and has also moved forward with imposing new licence conditions on the $1.8 billion financial advice and wealth company.

IOOF stock has lost 51.8 per cent of its value this year, with the lion’s share of the losses coming after the legal action became public on December 7.

The July court timetable is a small win for the IOOF camp as APRA had been pushing for an August start for the hearing.

During the first case management hearing on December 20, the parties agreed three weeks would be required, but APRA’s counsel said the June start being requested by IOOF would be too soon. “APRA thinks June is a bit ambitious,” the regulator’s barrister Fiona Roughley said.

Still, the hearing will see Mr Kelaher and Mr Venardos sit out most of 2019 on leave while the matter is contested and a judgment finalised.

The other executives remain in their roles, although are unable to involve themselves in the management of IOOF trustee companies or have any engagement with APRA.

Non-executive director Allan Griffiths was appointed acting chairman while wealth management boss Renato Mota became acting chief executive.

In an ASX statement earlier this month, IOOF said APRA’s ­allegations were “misconceived and will be vigorously defended”.

APRA argues IOOF has failed on many counts to meet deadlines the regulator set for it to improve its systems and management of conflicts of interest. It issued a show-cause notice relating to alleged breaches of the Superannuation Industry (Supervision) Act.

Mr Kelaher has drafted in heavy hitting legal firm Arnold Bloch Leibler to defend him in the case. James Peters, QC, is representing Mr Coulter and other IOOF executives.

There are seven defendants in the case. IOOF Investment Management and Questor Financial Services are defendants alongside the five individuals.

As part of its commitments to APRA under IOOF’s agreed ­licence conditions, the company will appoint an independent ­expert by close of business on Monday, with the appointee to later review progress and report back to the regulator.

KPMG, as IOOF’s auditor, is all but certain to be ruled out from the role.

The company has also agreed to split its registrable superannuation entity licence and responsible entity functions into distinct legal divisions by the year’s end.

IOOF and Mr Kelaher have come under heavy criticism this year, including at the Hayne royal commission, for handwritten board minutes and charging fees where no services were provided or for charging dead people’s ­accounts.

APRA also came under attack for taking a light-handed ­approach to enforcement.

IOOF had $164.9bn in funds under management, advice and supervision at September 30.