Australian regulator lost a landmark case on Friday. Allegedly wealth manager IOOF Holdings had breached pension laws. The court ruled it had not proved its case.
IOOF’s shares soared by 8% after the dismissal of the case. It was the second setback in as many months for regulators looking to clamp down on misconduct.
Moreover, the Australian Regulator had failed to demonstrate its allegation, according to the Federal Court Judge. The allegation was that they use reserve funds to make up for investment losses. The top IOOF Holdings officials were accused of breaching pension laws.
The decision was disappointing for the APRA. IOOF said it would review the judgment in detail before commenting further after the ruling.
Originated directly from last year’s powerful Royal Commission inquiry into the financial sector. Therefore, it uncovered widespread misconduct at the expense of consumers.
Furthermore, a regulator ramp up its financial sector enforcement. And a legal system is still bound by rules of evidence. Also, it underscores a disconnect between intense political pressure.
According to APRA Deputy Chair, the case examined a range of legal questions. In relation to superannuation law and regulation that had not previously been tested in court.
Additionally, litigation outcomes are inherently unpredictable. However, APRA remains prepared to launch court action. Also, when entities breach the law or fail to act in an open and cooperative manner.
The Federal Court rejected a case by the securities regulator. The Australian Securities and Investments Commission against Westpac Banking Corp alleging the No. 2 back approved mortgages without adequate credit checks.
Both watchdogs have given public statements promising to take a more hardline approach to enforcement. Moreover, the retired judge presiding over the Royal Commission slashed regulators earlier this year. This is because of being too soft in the sector.
Australian Regulator’s Unprecedented Case
Disqualifying five IOOF executives for failing to act in their customer’s interests, the Australian Regulator had sought to use the Federal Court action, which is an unprecedented move in Australia.
To compensate them for losses caused by the company, the IOOF use money belonging to pension fund customers was the accusation. It had been working with the company to resolve concerns unaddressed conflicts of interest since 2015.
Managing director, Christopher Kelaher and Chairman George Venardos stepped aside to fight the court case.
Jagot put off making a formal decision about whether to disqualify the IOOF directors to a later date although she dismissed the regulator’s claims of wrongdoing. Australian Regulator was ordered to pay the wealth manager’s legal costs.
Furthermore, Jagot said Mr. Kelaher contravened any of his director’s covenants, which is not possible to conclude that by acting as he did. APRA’s case fails at each step on the question of proof which is an inescapable fact.
A senior lecturer at The University of Sydney Business School, Andrew Grant said that APRA’s exercise had been costly. To add, regulators are taking a few shots and the punches aren’t really landing.