ASX-listed financial services firm, IOOF, has been rapped on the knuckles for numerous “corporate governance and licensee breaches” following the completion of a regulatory investigation last week.
While the inquiry knocked back the more serious insider trading allegations, the Australian Securities and Investments Commission (ASIC) found IOOF had made several operational errors.
“This review identified a number of concerns relating to IOOF’s compliance arrangements, breach reporting, management of conflicts of interest, staff trading policy, disclosure, whistleblower management and protection and cyber security,” the ASIC release says.
IOOF manages over $570 million on behalf of NZ investors – mostly for the $460 million Britannia UK pension products and the former Plan B advisory network – via the Integral Master Trust.
In spite of the compliance breaches ASIC declined to impose any penalty on the firm, instead accepting IOOF had made “significant changes to their policies and procedures” as a result of the regulator’s efforts and the concurrent PricewaterhouseCoopers (PwC) review.
IOOF hired PwC to investigate the manager’s product research unit, which was at the heart of insider trader allegations made by a former employee.
According to the release, ASIC decided not to take further action on the insider trading allegations, relating to the early release of certain research reports by an IOOF employee, following “a thorough review of the circumstances and trades involved”.
“This review determined that the release of the research reports had no material effect on the price of the relevant securities and there was no other evidence to warrant the commencement of a formal investigation,” ASIC says.
ASIC has also reached an agreement with IOOF to engage an external compliance consultant to conduct an expanded, broader and more comprehensive review of compliance arrangements within all IOOF business units.
In a statement to the ASX last Friday, Chris Kelaher, IOOF managing director, said the year-long ASIC investigation was “predominantly concerned with issues of an historical nature”.
“IOOF is satisfied that each matter has been thoroughly investigated and where appropriate, action taken,” Kelaher said in the statement. “The ASIC announcement brings these matters to a close.”
However, the Australian regulator says it will continue to “monitor and work cooperatively with IOOF” to ensure the financial services conglomerate keeps its corporate house in order.
“ASIC has also reached an agreement with IOOF to engage an external compliance consultant to conduct an expanded, broader and more comprehensive review of compliance arrangements within all IOOF business units,” the ASIC release says.
IOOF’s NZ operations reported a profit of almost $337,000 on revenue of almost $3.3 million (comprising just over $1 million of recurring fees for funds under advice and more than $2.1 million in unit trust management fees) over the 12 months to June 30 last year.
During the 2014/15 fiscal period IOOF NZ also restated an intra-company charge relating to the previous financial year following a “transfer pricing review”.
“… it was determined that a profit margin earned from transactions with IOOF Services Co Ltd, a related party… was significantly higher than the industry average,” the IOOF NZ financial statement says. “As a result, during the year the Company rebated IOOF Services Co Ltd an amount of $215,528 with respect to the 2014 financial year.”
IOOF purchased the Perth-headquartered Plan B – including its NZ operations – in 2012 for about AU$50 million. Historically, IOOF has been an acquisitive business, bundling together numerous funds management, investment platform and advisory businesses.
As at March 31 this year, IOOF Australia reported total “funds under management, administration, advice and supervision” of AU$131 billion.