APRA imposes extra conditions on Australian Ethical Super over spending concerns
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The news: Australian Ethical Superannuation (AES) will need to launch an independent review of related-party arrangements with parent company Australian Ethical Investments and implement recommended improvements after prudential regulator APRA imposed extra licence conditions to address expenditure management concerns.
The context: The third party reviewer will be expected to recommend how to “enhance compliance with key regulatory duties, and to implement any recommendations made”.
The conditions were imposed following intensified scrutiny of fund expenditure including a review of the super business’ related-party expenditure practices.
The review identified particular deficiencies in relation to investment management agreements with parent company Australian Ethical Investments.
APRA said AES has not demonstrated it has processes to “scrutinise and justify how the fees it pays to its parent company are consistent with the best financial interests of members”.
AES said it is confident that the issue will not negatively impact on the retirement savings of its members. The fund said it has already made enhancements to its governance processes over the last 12 months.
What they said: “Implementation of the additional licence conditions will support improved outcomes for AES’s members and ensure that there is an appropriate level of independence, rigour and transparency regarding expenditure decisions,” APRA deputy chair Margaret Cole.
“Superannuation fund members should be able to expect that trustee expenditure decisions are made for the benefit of members. APRA will not hesitate to utilise the full force of its powers to hold trustees accountable to meet this obligation."
AES chair Fiona Reynolds said she acknowledges the decision and the board is "committed to building on recent changes to further strengthen our governance processes".
"I wish to reassure members that there is no change to the security of their retirement savings, benefits, entitlements or our approach to ethical investing and members' best financial interests remain central to our decision-making."
The sources: APRA media release, ASX
