ACTU assistant secretary Joseph Mitchell says APRA compromised by uneven treatment of industry funds and trustees
An industry super director and union official said APRA should stop harping on about unlisted asset valuations and fix the ‘bin fire’ of how Shield and First Guardian got admitted to wealth platforms.
A union official and industry superannuation board member has attacked the Albanese government’s idea of forcing superannuation funds to cover the losses from the $1bn Shield and First Guardian scandals, saying the financial sector’s watchdogs were asleep on the job.
The Australian Council of Trade Unions suggested that instead of forcing super funds to cover losses from the investment schemes, attention should be focused on those with the means to pay and the ineffective regulation that enabled the alleged misconduct.
The ACTU reserved special criticism for the prudential regulator, claiming APRA failed to notice the growing risks from the for-profit side of the superannuation sector tempting retirees to shift their wealth out of industry funds.
It added the Australian Prudential Regulation Authority has been so focused on policing the industry funds and their portfolio allocation that it allowed rogue operators to spirit away billions in the lightly regulated trustee sector.
ACTU assistant secretary Joseph Mitchell said APRA was missing in action on trustees and wealth platforms. APRA has “gotten off quite lightly” from the Shield and First Guardian scandals, where the focus has been on ASIC over its role.
“After the fact, APRA came out and said trustees can’t outsource their responsibility. The warning signs have been flashing for quite some time,” the ACTU assistant secretary said.
“You’ve got APRA talking to funds about valuations, investing in unlisted assets, but this bin fire has been burning in the background and has been unpoliced.”
APRA relented last month on its proposed attempt to tighten limits around super fund directors, telling the sector in October it would allow board members a 12-year tenure limit “with short extensions in limited circumstances”. It sought to cap time served on a board to ten years.
This change would have captured a number of industry super directors, and Mr Mitchell said the regulator had failed to articulate why the limits were “appropriate”.
Mr Mitchell, who sits on the boards of Industry Super Australia and TelstraSuper, said trustees were evading scrutiny.
“There should have been greater attention earlier,” he said.
APRA should have pushed the trustees to ensure they had a “really clear line of sight” on what funds they were carrying on their platforms.
Macquarie, which operates the country’s second-largest wealth management platform, has just banned InterPrac Financial Planning advisers from adding new business. Netwealth will do the same from January. Only a handful of advice firms around the country recommended clients invest in Shield and First Guardian and three of those firms operated under InterPrac’s financial licence.
“They have not done any of that and there has been an enormous loss of money,” Mr Mitchell said.
The Albanese government is contemplating forcing the superannuation sector to contribute to the Compensation Scheme of Last Resort to make Shield and First Guardian victims whole, according to Assistant Treasurer Daniel Mulino.
“Every effort should be made for people who profited from this to make them pay first,” the union official said.
APRA has attempted to defend its role in the scandal, with its chairman John Lonsdale telling The Australian last week the agency had “done a lot of work” sending letters to funds putting them on notice and “more work needs to happen on governance”.
APRA had demanded to know how Shield and First Guardian were placed on investment platforms.
But Mr Mitchell said the onus was on APRA to tell the market what it was doing and that sending letters “is not enough”. “I haven’t seen enough from APRA to suggest they have a plan to deal with this going forward,” he said.
More Coverage
Originally published as ACTU assistant secretary Joseph Mitchell says APRA compromised by uneven treatment of industry funds and trustees
