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What’s the difference between IOOF and Hostplus’ use of member funds?
A key Parliamentary committee has discussed the parallels between IOOF Limited’s disputed use of member reserve funds to rectify member balances and Hostplus’s possible use of member funds to pay a penalty imposed by the Australian Securities and Investments Commission (ASIC).
The Parliamentary Joint Committee on Corporations and Financial Services was told by ASIC commissioner, Danielle Press, that she assumed that Hostplus had paid a $12,000 fine imposed by the regulator from member funds.
The ASIC penalty was imposed over the superannuation fund wrongly using messaging to claim it was providing “independent” financial advice.
NSW Liberal Senator, Andrew Bragg, compared the Hostplus use of member funds to pay the penalty to IOOF Limited’s use of the member’s reserve to recompense members for a mistake made regarding one of the company’s superannuation fund.
“In this case – as opposed to IOOF that has had an internal discussion about whether to pay a fine or to compensate members from either its shareholder capital or from the member reserve – in a case like Hostplus', there is no shareholder capital?” Bragg asked Press.
The committee heard the following exchange:
Bragg: Effectively then, these type of penalties will always be paid from members' money?
Press: I would assume that's correct, yes.
Bragg: Where else would it come from?
Press: It would be paid out of the reserve – yes, the general reserve probably.
Bragg: Would the members of that fund be notified?
Press: I suspect that would depend on the protocols around the use of that reserve. I would suspect not directly, although under the new RG 97 requirements, we would require that any use of reserve be articulated as a fee.
Bragg: Let me just play this out. If there is a fund that doesn't have access to shareholder capital and it receives a substantial fine, where it draws that money from the members' funds, it doesn't necessarily have to disclose that to the members of the fund?
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Sounds like double-standards to me....for one, a group of people are in court, for the other, life carries on...?
Once again ISFs have their own set of rules. Wonder what ASIC will think about recent cyber fraud against the ISFs ?