The chief executive of IOOF has admitted that the company did not report serious allegations of misconduct by senior staff to the corporate regulator, despite conducting an internal investigation into insider trading and front running.
Chris Kelaher made the confession at a Senate hearing on Tuesday, when he was questioned over allegations that IOOF covered up staff misconduct.
The Australian Securities and Investments Commission (ASIC) regulatory guide states that market participants must report suspected front running or insider trading.
IOOF – which has a market value of $2.6 billion – sells financial advice, superannuation, investment management and trustee services.
According to the
Sydney Morning Herald, Kelaher confirmed the company had investigated its head of advice research, Peter Hilton, in 2009 and again in 2014 for potential front running – the act of buying shares ahead of a client to benefit from price increases from surplus demand.
Kelaher is also reported to have said that IOOF investigated a former staff member, Edward Youds, for insider trading, and claimed that the company found neither employee had broken the law.
ASIC was made aware of the allegations after they were unveiled by Fairfax Media.
Kelaher claimed during the hearing that these kinds of misconduct were “alien to our company”.
Discussing Youds’ suspected insider trade, Kelaher explained that “it was resolved that it was in fact at best a breach of Chinese Wall arrangements”.
Internal emails showed that Youds received a first and final warning, and was requested to donate the profit made from the transaction to a charity of the company’s choice.
When questioned further by Senator Williams, Kelaher admitted to the hearing that Hilton had received two final warnings.
“How many final warnings can you get before you are terminated?” the senator responded.
A previous investigation by Fairfax revealed that senior staff at the company had allegedly engaged in serious misconduct – including insider trading, front running and misrepresentation of performance figures – and asked junior staff to cheat on training and compliance modules on behalf of their boss.
Hilton is at the centre of allegations around encouraging staff to cheat on training modules, as well as being involved in an internal investigation into front running.
Internal documents reportedly showed that Hilton received a final warning in May 2009, and another in mid-2014 for a password breach.
Around the same time, IOOF is reported to have revoked Hilton’s management status after an investigation found that he had his subordinates complete his Kaplan and compulsory training modules.
According to the
Herald, Hilton is currently on leave from the company.
