Class action lawyers circle as IOOF bosses face APRA super industry disqualification move

IOOF shares tumbled over 35pc after APRA moved to disqualify its bosses from running a fund amid talk of a class action.

IOOF’s Christopher Kelaher outside the royal commission hearings in August. Pic: AAP

Class action lawyers are circling stricken wealth manager IOOF, which saw its share price tumble 35 per cent today after the prudential regulator launched legal action to have executives, including managing director Chris Kelaher, barred from the super industry.

Phi Finney McDonald managing director and experienced class action litigator Ben Phi told The Australian his firm was already “looking into” launching a shareholder class action following a disastrous performance by Mr Kelaher at the banking royal commission in August.

“The matters that were raised at the royal commission were pretty profound but APRA’s action adds a new dimension to it,” he said.

He said no definite decision to go ahead had been made.

Shine Lawyers, which is also considering a class action against IOOF, to be bankrolled by litigation funder ICP, pounced on APRA’s action.

“We welcome APRA’s actions against IOOF and we will look closely at what the regulator has to say about alleged misconduct by IOOF,” class action special counsel Craig Allsopp said.

“We have been reviewing IOOF’s documents and preparing a claim against IOOF on behalf of shareholders. We are investigating a number of instances of alleged misconduct, as well as whether IOOF had appropriate policies and processes to identify and report misconduct to regulators.”

This morning the prudential regulator revealed it had taken legal action to disqualify IOOF chief executive Chris Kelaher, chairman George Venardos and other company executives from running a superannuation fund because they are not fit and proper persons.

At the same time, the Australian Prudential Regulation Authority has given the company 14 days to explain why it should not be subject to sweeping new licence conditions, saying the company has not done enough to clean up its inadequate risk and governance structures.

IOOF shares dropped as much as 33.4 per cent in morning trade before closing down $2.57, or 35.84 per cent, at $4.60.

IOOF said it was “disappointed” by APRA’s moves and said it believes allegations raised by the regulator were “misconceived”. It said it and its executives would “vigorously defend” the disqualification proceedings.

The move follows disastrous evidence from Mr Kelaher during banking royal commission hearings in August, during which he displayed contempt for APRA and defended IOOF’s decision to pay back investors in a cash management trust for its mistakes using their own money.

It also throws further doubt on the planned sale of ANZ’s super business to IOOF as part of a broader transfer of the bank’s wealth business.

ANZ deputy CEO Alexis George said: “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.”

IOOF has already taken over ANZ’s financial advice arm but the super transfer is subject to directors of ANZ’s trustee company deciding it is in the best interest of fund members.

In a concise statement of claim filed in the Federal Court, APRA said it wanted Mr Kelaher, Mr Venardos, IOOF chief financial officer David Coulter, company secretary Paul Vine and general counsel Gary Riordan booted out of the super industry.

IOOF chairman George Venardos

APRA said that a series of breaches, including the cash management trust breach, in which IOOF’s interests were put before those of super members, showed that Mr Kelaher and Mr Vernardos failed to exercise “the degree of care, skill and prudence of a diligent superannuation entity director”, failed to put members first, and “failed to exercise reasonable care and diligence” to ensure two super trustee subsidiaries complied with their responsibilities.

It said the serious contraventions of the Superannuation Industry (Supervision) Act, “together with the conduct of Kelaher, Venardos, Coulter, Vine and Riordan in response to APRA’s prudential supervision, demonstrate that they are each not a fit and proper person to be a responsible officer of a trustee of a superannuation entity”.

ANZ; s Ms George sought to reassure investors following the sale of its OnePath pensions and investments business to IOOF in October 2017.

“The work to separate pensions and investments from our life insurance business

continues. There is a framework available to complete the Zurich transaction that does not

involve IOOF,” Ms George said.