APRA warns superfunds against conflict of interest over housing policy

The financial services watchdog has warned super funds they face serious penalties for breaching conflict-of-interest regulations after Cbus committed $500m to the government’s signature housing policy.

APRA deputy chair Margaret Cole. Picture: John Feder

The financial services watchdog has warned super funds they face serious penalties for breaching conflict-of-interest regulations after Wayne Swan’s Cbus committed $500m to the government’s signature housing policy despite holding concerns about its design.

After Liberal senator Andrew Bragg accused Mr Swan of having a conflict of interest in committing Cbus to investing in the Housing Australia Future Fund, Australian Prudential Regulation Authority deputy chair Margaret Cole said super fund trustees “must ensure they are complying with their regulatory obligations”.

“APRA expects all trustees to have in place, and to observe, appropriate conflicts-of-interest policies and an investment governance framework, supporting their fund investment decisions,” Ms Cole said in a letter to Senator Bragg. “Trustees are required to adhere to legislative requirements (including the best financial interests’ duty and duties in relation to conflicts), and the relevant prudential framework.”

The warnings come after emails released under Freedom of Information requests show a Cbus staff member told Jim Chalmers’ office the superannuation fund was concerned about the design of the HAFF.

The concern from Cbus was expressed in December 2022 – a month after the fund had committed $500m to support the construction of social and affordable housing through the HAFF.

“Our head of debt has identified some issues in the HAFF exposure draft legislation which have the potential to jeopardise our ability as institutional investors to get involved,” said an email from a Cbus staff member to a member of the Treasurer’s office.

Senator Bragg said Mr Swan held a conflict of interest for holding leading positions at both the Labor Party and Cbus, and called for it to be eliminated. Dr Chalmers was a senior member of Mr Swan’s office when the now ALP president was treasurer during the Rudd-Gillard governments.

“In relation to Cbus, I don’t see how Mr Swan can occupy the dual roles, particularly when he is chair of the only fund that has promised to invest in the HAFF,” Senator Bragg said. “I would expect APRA to be questioning whether he is a fit and proper person to be in that position given the material conflict of interest he has.

“The only person who has offered to commit to the HAFF is the chair of the Labor Party and Cbus. I think APRA need to be making a judgment about whether this is a fit and proper arrangement. I don’t believe this is a conflict of interest that can be managed.”

A Cbus spokesman said “every investment we make is assessed rigorously to ensure it’s in members’ best financial interest”.

“It is very typical for investment opportunities to evolve over time and for Cbus to provide feedback on ways to enhance investment propositions,” he said.

A spokesman for the Treasurer said “super funds make their own decisions in the best financial interests of members”.

In May, APRA confirmed it had launched a formal investigation into millions of dollars flowing between industry super funds and unions and said it was prepared to enforce legal action if its probe found payments were not in members’ financial interests.

The Australian last month revealed cashed-up industry super funds have funnelled more than $114.5m into trade union coffers since mid-2016, including $10m in the lead-up to last year’s federal election.

At a Senate estimates hearing earlier this year, APRA chair John Lonsdale said the regulator was prepared to take action against certain entities. Investigators are wading through Australian Electoral Commission transparency register disclosures, looking into whether payments delivered value for money for members.