Fund Regulatory Update

IOOF subsidiary loses appeal, to pay tens of millions in compensation

IOOF subsidiary Australian Executor Trustees (SA) Limited lost an appeal against a decision made by the Supreme Court of New South Wales in 2019 in the S.E.A.S Saptor Forests Pty Ltd case. IOOF is to pay tens of millions in compensation.

The case involves timber investments, where AET was appointed as trustee of the S.E.A.S Saptor Forests Pty Ltd in 1965, with the scheme to invest in timber on behalf of ‘convenantholders’ who took losses in the end.

One convenantholder, David Kerr, was backed by lawsuit funder IMF Bentham and as such acted on behalf of 4,500 investors in seeking $82 million in compensation. The Supreme Court ruled that Kerr was entitled to receive equitable compensation from AET for the amount he sought, sans the receiver costs of $1.6 million. IOOF sold the AET corporate trust business to Sargon in 2018, but retained the private trust business.

Committee examines Diversa and BetaShares relationship

The House of Representatives Standing Committee on Economics has quizzed Future Super, Verve and Diversa Trustees on their relationship with BetaShares. The strategy at Future Super is allocating 60 per cent of assets to three BetaShares exchange-traded funds (ETFs), with some questions regarding the specific investments with claims made of ESG portfolios and how true they were. An example was Cleanaway (household rubbish collectors) and their track record being poor after multiple fines for bad behaviour by the Environmental Protections Agency (EPA). Future Super also receives rebates from BetaShares. Future Super collaborates with BetaShares to build suitable products.

Future Super and Verve have been accused of misleading members who are unlikely to understand the fund’s relationship to Diversa Trustees, with Linsday Tanner saying that Verve and Future Super were ‘promoters’ of Diversa funds. Andrew Leigh then suggested the funds were like ‘giant SMSFs’ [self-managed superannuation funds]. Verve and Future Super have defended their fund decisions.

Westpac loses appeal in unlicensed personal advice case

The High Court has agreed with the Federal Court decision from 2019 that two Westpac subsidiaries provided unlicensed personal financial advice. Westpac’s appeal was dismissed, thus determining that the financial product advice provided by Westpac to 14 members in two 2014 phone campaigns in relation to switching superannuation funds and whether the advice was personal or not as per the definition. The campaigns saw Westpac add $650 million in funds under management.

Originally Westpac won the case, but ASIC appealed and won. Westpac then appealed, and this is the outcome of that decision.