Financial services giant IOOF believes the way it compensated 9000 superannuation members passes “the pub test” amid concerns over its governance and conflicts of interest.
The banking royal commission has heard IOOF does not agree it needs to address governance issues but will move to change its structure “as it’s just easier” after the prudential regulator repeatedly raised concerns.
Managing director Christopher Kelaher on Friday defended the publicly-listed company’s remediation of retirement fund members in order to fix a payment problem involving former subsidiary Questor.
He denied IOOF “used members’ money to purportedly compensate them”, rather than the company paying.
The Australian Prudential Regulation Authority (APRA) questioned whether Questor acted appropriately and raised concerns it had not effectively managed conflicts of interest in allowing the remediation plan, a 2016 document before the commission showed.
In a letter to APRA last year, Mr Kelaher said Questor at no time received any demands for compensation or complaint about its remediation and compensation plans from any member of the affected super fund.
“In terms of the so-called ‘pub-test’, which in these circumstances is a proxy for members’ best interests, it is the board’s view that the test has been passed,” he wrote.
Asked to explain the pub test to the commission on Friday, Mr Kelaher said institutions like IOOF were constantly confronted with community expectations.
“At all times here, at the end of the day, the aspiration was to return the member to his whole position and compensate him for the period outstanding and that’s something we did and that’s something people would resonate with.
“That’s something they would want and that’s what they would expect.”
Mr Kelaher rejected suggestions Questor breached its duty to act in the best interests of members.
He also denied remediation occurred because of APRA’s intervention.
The inquiry heard APRA has raised concerns about IOOF’s investment management arm also being a superannuation trustee, including that some decisions appeared to have favoured the interests of shareholders over those of superannuation fund members.
IOOF’s board last week agreed to change the structure of trustee IOOF Investment Management Ltd and investigate separating the registrable superannuation entity and manager of the investment fund to address APRA’s concerns.
The minutes of the board meeting, which the royal commission demanded be produced, consisted of hand-written notes.