U.S. Markets closed

Australia’s Financial-Crackdown Plans Suffers Blow as Regulator Loses Case

Matthew Burgess

(Bloomberg) -- Australia’s financial regulators have suffered another setback in their quest to take a tougher approach to policing misconduct after losing a second high-profile court case in little over a month.

The Australian Prudential Regulation Authority on Friday lost its case against IOOF Holdings Ltd. that claimed the wealth manager’s executives failed to act in the best interests of pension-fund customers. The Federal Court ruled the company had not breached the law and dismissed APRA’s attempts to disqualify executives.

The ruling comes after the Australian Securities and Investment Commission last month lost a case claiming Westpac Banking Corp. breached responsible lending laws more than 260,000 times. ASIC has appealed the decision.

Friday’s decision is a blow to calls for the regulators to take a tougher approach to policing banks and financial firms, after an inquiry into misconduct in the industry criticized them for failing to hold wrongdoers to account. The inquiry lambasted regulators for favoring negotiation over litigation, then reaching settlements that tend to favor the banks and extracting penalties that don’t have a deterrent effect.

APRA said it will examine the judgment in detail before deciding whether to appeal, but the loss won’t stop it pursuing court action.

“Litigation outcomes are inherently unpredictable, however APRA remains prepared to launch court action, where appropriate, when entities breach the law or fail to act in an open and cooperative manner,” Deputy Chairman Helen Rowell said in a statement. “APRA still believes this was an important case to pursue given the nature, seriousness and number of potential contraventions APRA had identified with IOOF.”

The ruling clears the way for IOOF to complete its A$975 million ($661 million) acquisition of Australia & New Zealand Banking Group Ltd.’s wealth advisory unit, which had been delayed by the legal action.

The firm was also awarded costs in the APRA case.

Shares of the Melbourne-based company were 8% higher in late afternoon trade.

(Adds comment from regulator in fifth paragraph.)

To contact the reporter on this story: Matthew Burgess in Sydney at mburgess46@bloomberg.net

To contact the editors responsible for this story: Edward Johnson at ejohnson28@bloomberg.net, Peter Vercoe, Katrina Nicholas

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.