The Australian Prudential Regulation Authority ( APRA Superannuation Industry (Supervision) Act 1993 Act
The proceedings were launched by APRA following a Banking Royal Commission case study which examined IOOF’s superannuation funds management processes.
APRA had argued that on three separate occasions in 2015, the relevant IOOF trustee entities improperly compensated superannuation beneficiaries for losses caused by the IOOF entities. In particular, it was alleged that because the IOOF entities paid the compensation from the beneficiaries’ own reserve funds, rather than from the IOOF entities’ personal funds or otherwise insurance or other third party funds, the entities exposed themselves to a conflict of interest by preferring the interests of the entities’ shareholders (insofar as the entities wished to preserve their own capital and maintain shareholder profits) over those of the beneficiaries. APRA contended that the IOOF entities failed to act in the best interests of members.
These arguments were rejected by Justice Jagot, who was critical of APRA for running its case on the basis of generalities and broad assertions. In particular, Justice Jagot noted the ‘systemic weakness’ ‘alleged defaults and inadequacies in IOOF’s systems, policies and procedures, without descending into the detail of proving the actual systems, policies and procedures in play in respect of the incidents in question’. ‘treat[ed] the facts as if they automatically bespeak liability’ ‘cast[ing] the trustees in the role of insurer to the beneficiaries, which is contrary to principle’ being used to compensate beneficiaries for trust losses and the specific payments to the beneficiaries made by the IOOF entities did not threaten the ongoing stability of the superannuation funds or their ability to withstand future operational risks.