IOOF’s chief executive Chris Kelaher has confirmed the company did not lodge ASIC breach reports for a number of issues, despite evidence of misconduct inside its research division.
Kelaher fronted the Senate Economics References Committee in Macquarie Street, Sydney yesterday, facing stiff questioning about his knowledge of alleged misconduct within its research division.
The Senate committee hearing was chaired by Senator Sam Dastyari, with the participation of Senator John Williams and Senator Sean Edwards. Kelaher was quizzed for one-and-a-half hours over the allegations of misconduct, including insider trading, front-running and accusations of bullying and cheating.
Other IOOF employees called by the committee were not in attendance, including Peter Hilton, head of IOOF advice research, who is on sick leave, according to Kelaher.
“Someone in the research division had concerns about the conduct and procedures, they raised it with superiors and with relevant people, but felt they had been stonewalled, and felt that appropriate courses of action had not been taken,” Dastyari said.
In response to the complaints and further investigation by an IOOF compliance team, Kelaher said an individual who had shared a password with junior employees – who in turn completed an online Kaplan compliance test on his behalf – “was demoted, lost his bonus and given a first and final warning.” He also confirmed no breach report was issued with the Australian Securities and Investments Commission (ASIC).
It emerged that the same individual had also been given a “first and final warning” around 18 months earlier. When questioned about this by Senators Williams and Dastyari, Kelaher referred to internal human resources protocols, which he believes deemed the repeated issues of misconduct were unrelated and therefore “not cumulative”.
According to Kelaher, the more serious issues of frontrunning and insider trading were investigated in December 2014 in an independent review undertaken by Pricewaterhouse Coopers (PwC).
“If there was a suggestion of front running, why wasn’t it appropriate to report it to ASIC?” asked Senator Williams.
“The findings were nil…there was no finding of front running,” Kelaher responded.
The IOOF CEO said he was not directly involved in commissioning the PwC report, which was organised by the internal human resources team as part of Fair Work proceedings.
The PwC report was finalised in May, though has not been made publicly released. Kelaher agreed on notice to make this available to the Senate committee.
Senator Williams established that the whistleblower who raised the above issues did not participate in the PwC investigation. He also asked the Kelaher whether issues of bullying, plagiarism and frontrunning were “run of the mill for IOOF?”
“The kind of culture you’re referring to is totally alien to our company…to substantiate some of the bullying accusations, front running was thrown in to add fuel to the fire.
“We regard the matter very seriously…they [PwC] made a considered inquiry and provided us with a written report indicating the allegations weren’t true,” Kelaher said.
Senator Dastyari also raised issues around IOOF’s “victimisation of the whistleblower,” who had subsequently left the company. In response, Kelaher said “the employee in question was invited to come in and speak with the company, on a number of occasions, but declined.”
Senator Williams later said that a lot of credible and lucid evidence had been received from the whistleblowers, but added that: “A lot of the contentions made in rebuttal seem somewhat hollow.”
While IOOF did not submit ASIC breach reports for the adviser plagiarism or issues investigated by PwC – under the recommendation of its compliance management – Kelaher said breach reports were submitted for other issues including incorrect risk profiling and contribution cap breaches. “One breach is too many, but looking at the claims over the last several years, we’re still remediating things that occurred in 2009,” he said.
