Australian Ethical Superannuation (AES) has seen additional licence conditions imposed on it by APRA over the fund’s expenditure management.
AES is the trustee for the Australian Ethical Retail Superannuation Fund and the additional conditions follow a review by APRA of the fund’s related party expenditure practices.
APRA’s review identified deficiencies regarding the robustness of AES’s approach to related-party expenditure, particularly in relation to investment management agreements with its parent company, Australian Ethical Investments. AES has not demonstrated that it has adequate processes to scrutinise and justify how the fees it pays to its parent company are consistent with the best financial interests of members.
Under the additional licence conditions, AES will be required to appoint an independent third party to review and recommend improvements to these outsourcing decisions and enhance compliance with key regulatory duties, and to implement any recommendations made.
APRA deputy chair Margaret Cole said: “APRA expects trustees to have robust policies and procedures in place to uphold strong governance practices, appropriately manage conflicts and prioritise the financial interests of their members.
“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.
“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.”
Responding to the decision, AES said it was “confident” this issue had not negatively impacted members’ retirement savings and that it had proactively made changes to enhance its governance processes and will continue to do so.
Australian Ethical Investment chair Steve Gibbs said: “The board and management are committed to upholding the highest standards of governance. Our focus is always on acting in the best financial interests of members and that includes having strong governance.”
Chair of AES, Fiona Reynolds, said: “We have already made several changes, including board renewal initiatives, implementing strengthened conflict management protocols, and validating frameworks to enhance 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. We continue to deliver strongly against our investment strategies and objectives while supporting a better future for people, planet and animals.”
