A federal court in Australia has ruled against the country’s financial regulator, the Australian Prudential Regulation Authority (APRA), in its misconduct lawsuit against wealth manager IOOF.
APRA alleged that IOOF had breached the country’s pension laws, claiming that , directors and executives had failed to act in the best interests of their superannuation members. APRA said that before it decided to take IOOF to court, the regulator had sought to resolve concerns over several years, but concluded that the company “was not making adequate progress,” or was not likely to do so in an acceptable period of time.
“It was for APRA to prove the primary facts on which the allegations of contraventions depended. The way in which it sought to do so was fundamentally inadequate,” Federal Court Justice Jayne Jagot wrote in her ruling, adding that “APRA’s approach involved reliance on the doctrine of res ipsa loquitur [accident implies negligence] when the one thing that is clear is that the facts of the incidents in question in this case by no means speak for themselves.”
APRA said in a statement that it was “disappointed by the decision” and is examining the judgment in detail, and will make a decision on whether to pursue an appeal.
“Litigation outcomes are inherently unpredictable, however, APRA remains prepared to launch court action – where appropriate – when entities breach the law or fail to act in an open and cooperative manner,” Helen Rowell, APRA’s deputy chair, said in a statement. “APRA still believes this was an important case to pursue given the nature, seriousness and number of potential contraventions APRA had identified with IOOF.”
The ruling could affect a class action lawsuit that was filed against IOOF in April alleging that the wealth manager breached stock market disclosure obligations and “engaged in misleading or deceptive conduct.”
The law firm leading the case against IOOF cited an announcement by APRA of various proceedings against IOOF’s subsidiaries and officers related to the alleged breaches.
IOOF said in a statement that it welcomed the ruling and was “reviewing the written judgment in detail and expects to issue a further announcement in due course.”
APRA said that additional license conditions it had imposed on IOOF last December are unaffected by the federal court’s ruling and remain in force. Rowell also said that despite losing the case, APRA’s “tougher approach” to enforcement did lead to improvements at IOOF.
“APRA has seen significant improvement in the level of cooperation from IOOF since this case was launched,” she said. “Additionally, the new license conditions have enhanced IOOF’s organizational structure and governance, including the role and independence of the trustee board within the IOOF group. This will better support effective identification and management of future conflicts of interest,” she said.