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BFCSA: IOOF "Litany of Wrongdoings" Insider Trading - senior employee

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Litany of wrongdoings at IOOF included insider trading by senior employee

Date June 20, 2015 - 12:08AM

Adele Ferguson and Sarah Danckert

 

http://www.theage.com.au/business/banking-and-finance/litany-of-wrongdoings-at-ioof-included-insider-trading-by-senior-employee-20150619-ghsjcu.html

 

One of Australia's largest financial institutions, IOOF, did not call the corporate cops when it caught one of its senior employees insider trading. Instead IOOF made him pay the profit to a charity of the company's choice.

 

An investigation by Fairfax Media uncovered the internal investigation at IOOF in 2009 into the senior staff member's "suspicious trades" as part of a wider expose that has revealed a litany of wrongdoings at the financial planning giant.

 

The suspicious trade is just one of a series of incidents at the once venerable friendly society that was founded in 1846 as the Independent Order of Odd Fellows and, through numerous acquisitions, has transformed into a financial advice behemoth with $150 billion of Australians' retirement savings in its care, earning the company the nickname "Pac Man".

 

The staff member has since left the company and now works for another financial institution.  When contacted by Fairfax Media this week, the former IOOF employee confirmed the existence of the "insider trading" incident.

 

"I think this is totally confidential and something that was between me and the company at the time and whoever has released that to you is outside any privacy.  "You're not the regulator or anything like that so I'm not going to actually comment."  He said the Australian Securities and Investments Commission was not involved in the investigation, adding: "It was all resolved in house."

 

IOOF refused to comment on the specific allegation.  "IOOF does not consider it appropriate to comment on the circumstances of individual employees or former employees in a public forum for privacy reasons." It said it was satisfied that appropriate action was taken.

 

It is the latest in a string of examples of financial institutions facing serious questions over ethical standards and culture, as a Fairfax Media investigation has unearthed a cache of confidential documents and explosive whistleblower testimony. Other former staff members also supplied information.

 

Many of the confidential documents relate to Peter Hilton, who holds an influential position as IOOF's head of advice research.  Mr Hilton was investigated by the company for front running on a relative's account. It resulted in a first and final warning. It also introduced a 10-day embargo on trading in securities from the date of release of research. Front running is illegal. It can occur when stock is bought ahead of the release of a research report that could benefit the buyer of the stock.

 

Other internal documents show that Mr Hilton was given a further final warning in 2014 and stripped of his responsible manager status for "instructing a direct report to complete Kaplan and eLearning training on his behalf". It says "Hilton to re-sit all eLearning modules" and "Hilton to complete 12 hours training" and that "training must be supervised".

 

The cheating allegations follow a scandal at Macquarie Group where some financial advisers cheated on competency exams using a document circulated by management known as the "Penske File".

 

Industry-wide cheating, poor education standards and questionable ethics prompted a parliamentary joint committee to release a set of proposal to raise "professional, ethical and education standards in the financial services industry". The government is yet to respond to its recommendations.

 

A "research corrective action plan" document released in mid 2014 also highlights misrepresentation of outperformance numbers of funds. It says a decision had been made that "out performance numbers would no longer be produced as representative". The company refused to comment on its issues with performance figures.

 

 

The scandal inside IOOF's research division – the engine room of the financial group – happened as a Senate inquiry into Commonwealth Bank's financial planning scandal called for a royal commission into the bank and a wider investigation into the entire industry.

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