Australian Regulator Issues $10.7 Million Fine to OnePath Custodians for Compliance Breaches

The Australian Prudential Regulation Authority (APRA) has taken action against OnePath Custodians Pty Limited (OPC), a major player in Australia's superannuation industry, for alleged breaches of the Superannuation Industry (Supervision) Act 1993 (SIS Act).

APRA has issued infringement notices totaling $10,704,600 to OPC for failing to invest members' default superannuation contributions in MySuper products as required by law. This penalty comes on top of a $1.5 million fine paid by OPC in June 2023 for similar conduct.

In addition to the financial penalty, APRA has accepted a court enforceable undertaking (CEU) from OPC. The undertaking commits OPC to rectify compliance deficiencies and compensate affected members. OPC, which manages over $37 billion for approximately 700,000 members, is one of four superannuation trustees owned by Insignia Financial Ltd (formerly IOOF Holdings Limited).

The action follows a series of regulatory interventions by APRA, including the imposition of additional license conditions on OPC and other Insignia group trustees in November 2022. These conditions were aimed at addressing governance, accountability, and risk management deficiencies within the group.

APRA Deputy Chair Margaret Cole emphasized the regulator's commitment to holding trustees accountable, especially for repeated breaches. "This action shows that APRA is willing to take strong enforcement action where it is warranted," Cole stated. "These MySuper changes came into effect ten years ago. Our patience for entities who are still struggling with foundational issues, with the potential for serious impact to members, has run out."

Under the CEU, OPC has agreed to:

1. Identify, rectify, and remediate all members adversely affected by the breaches, with input from an independent expert.
2. Allocate additional resources to replenish the Operational Risk Financial Requirement to 100% of the target balance of 0.25% of funds under management.
3. Hold $40 million of its existing Operational Risk Financial Requirement assets as an overlay until the terms of the CEU are satisfied.

The regulator expressed ongoing concerns about OPC's alleged failures to adequately implement MySuper provisions, viewing these as indicative of persistent cultural and governance issues within the organization.

This enforcement action underscores APRA's expectations for high standards of governance and risk management in the superannuation industry, particularly from large participants like the Insignia group. It serves as a stark reminder to all superannuation trustees of the importance of robust compliance frameworks and swift remediation of potential breaches.

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