Class action looms for IOOF
18 March 2019, Written by Business News Australia
While Australia's prudential watchdog takes action against IOOF (ASX: IFL) directors and executives over alleged misconduct, the wealth manager is about to face another legal battle.
Sydney-based law firm Quinn Emanuel Urquhart & Sullivan announced today it planned to file a class action against IOOF, arising from evidence given at the Royal Commission alleging the company's subsidiaries breached their duties as superannuation trustees.
It is also alleged IOOF directors and officers were aware of these breaches.
This prompted Quinn Emanuel to litigate on behalf of investors, who saw the value of their shares dwindle from highs of $11.44 per share in October 2017 to as low as $4.50 after the Australian Prudential Regulation Authority (APRA) started disqualification proceedings against IOOF in December last year.
The APRA action has targeted former managing director Chris Kelaher and former chairperson George Venardos, as well as others.
Shares have recovered somewhat since then due to sound financial results from the group, but have dropped slightly following today's news.
Quinn Emanuel is acting on behalf of investors who purchased IFL shares between 27 May 2015 and 6 December 2018, with the claim backed by litigation funder The Regency Group.
"Quinn Emanuel's class action will allege that IOOF was aware that its conduct would have significant legal and regulatory risks," the law firm said today.
"During the period 27 May 2015 to 6 December 2018, IOOF is alleged to have breached its continuous disclosure obligations and engaged in misleading or deceptive conduct."
Despite the Royal Commission identifying serious failings in the industry and giving IOOF "cause for reflection", acting CEO Renato Mota (pictured) highlighted a solid financial result for the first half with profit up 200 per cent to $135.4 million.
He said the result was augmented by the ANZ Wealth Management Aligned Dealer Group (ADG) acquisition. However, APRA's action against IOOF representatives did put a spanner in the works for the $975 million purchase of the bank's OnePath Pensions and Investments (P&I) business.
"Given the significance of APRA's action, we will assess the various options available to us while we seek urgent information from both IOOF and APRA," ANZ deputy CEO Alexis George said after APRA announced its proceedings in December.
"The work to separate Pensions and Investments from our Life Insurance business continues. There is a framework available to complete the Zurich transaction that does not involve IOOF," George said.
In its half year results, IOOF noted an agreement had been reached with ANZ to accelerate the economic completion of the transaction, with IOOF receiving 82 per cent economic interest in the ANZ P&I business.
"The ability to structure the economic completion of the P&I business demonstrates a commitment by both parties to the transaction," Mota said.
"We are in constant and open dialogue with ANZ and are confident that clients' best interests will be served by the transition to IOOF."Never miss a news update, subscribe here. Follow us on Facebook, LinkedIn, Instagram and Twitter.
Business News Australia
Author: Business News Australia