APRA’s ability to disqualify super fund CEOs

The Australian Prudential Regulation Authority (APRA) has acknowledged that it can, in some circumstances, disqualify the chief executive of a superannuation fund.

APRA’s acknowledgement has come as part of a long-delayed answer to a question on notice from NSW Liberal Senator, Andrew Bragg prompted by decision-making within major industry fund Cbus.

Bragg had referenced evidence given during Senate Estimates that Cbus chief executive, Kristian Fok was not involved in the decision to commit $500 million to the Housing Australia Future Fund (HAFF) with the implication that the decision had been made by Cbus chair, Australian Labor Party president, Wayne Swan.

“I’m wondering from a governance point of view whether you would expect that the chief executive would be involved in committing members’ money to major projects or to major investments?” Bragg asked.

APRA said that the obligation to comply with its Prudential Standards fell to the superannuation fund itself but acknowledged its ability to act.

“However, APRA can, in certain circumstances, seek to disqualify an individual from being a ‘responsible officer’ of an RSE licensee (which would include being a chief executive officer), or direct their removal to ensure they do not take part in the management or conduct of the business of the RSE licensee,” the regulator said.

“Additionally, if an RSE Licensee has been found to have contravened certain provisions of the Superannuation Industry (Supervision) Act 1993 (SIS Act), action can be taken against a person (such as an executive officer) that has aided, abetted, counselled, procured, or induced that contravention.

“If the contravention is a civil penalty provision of the SIS Act there may be consequences for that person. APRA co-administers the SIS Act with ASIC and so either regulator may be able to take action depending on the circumstances of the case,” the APRA answer said.

APRA noted that the Financial Accountability Regime (FAR) which comes into effect for superannuation funds from 15 March “imposes a strengthened responsibility and accountability framework on RSE licensees (as accountable entities), and their directors and most senior executives (as accountable persons”.

“Where the RSE Licensee fails to comply with its accountability obligations, APRA or ASIC can apply to the court to impose a civil penalty on the entity,” it said.

“Where an accountable person fails to comply with their accountability obligations, the RSE Licensee is required to reduce the person’s variable remuneration by an amount that is proportionate to the failure. APRA or ASIC can disqualify that person from being an accountable person if the seriousness of the failure justifies such disqualification.”

“Additionally, if an RSE licensee has been found to have contravened a civil penalty provision of the FAR, a civil penalty can be imposed on a person (such as an executive officer) that has aided, abetted, counselled, procured, or induced that contravention.”