Revelations of insider trading within the super funds again highlights the super tycoons are focused on enriching themselves, not the workers. It reminds us of the need for strong law enforcement and further law reform imperatives.
Last week at Senate Estimates, the super prudential regulator APRA displayed worrying signs that their enforcement of the law is falling short. On multiple occasions, I attempted to understand why APRA was failing to reign in the New Daily - a propaganda outfit funded by workers’ super.
At Estimates, APRA gave a green light to super funds using opaque investment structures to set up organisations like the New Daily. This totally undermines the new best financial interests duty.
APRA's argument appears to be that it is okay for workers to fund the New Daily because it is caught up in a corporate structure called Industry Super Holdings. This exchange is telling:
Senator Bragg: Well the evidence you gave to the Committee today, is that because this organisation is part of a larger organisation, then it’s all good as it’s an “investment”?
Suzanne Smith (APRA): Thankyou Chair, what I was trying to explain was that the super funds are investors in ISH. ISH is the parent company that has three subsidiaries, one of which is ISA, one of which is IFM, the other of which is The New Daily. So the super funds are shareholders in ISH. My understanding is that the exposure of those super funds would be captured by their investment into ISH. What I didn’t say earlier is that as part of the profit that flowed to ISH from IFM is generated from funds that use IFM as an investment manager. There are many funds that use IFM. So profits are generated from multitudes of funds, those profits flow to ISH. So it's part of a portfolio. They need to look at their investments on that merits.
In other words, you can invest into anything, including firearms and weapons, if another part of the investment is profitable. But the new law is clear. It demands that this investment must be in the best financial interests of members.
The explanatory statement for the Best Financial Interests Duty shows APRA cannot allow entities to hide capital in opaque structures for any purpose. “The use of an interposed corporate entity...will not insulate the trustee from ensuring that the services that are ultimately provided to the fund are in the best interests of their beneficiaries.”
There is also no materiality threshold - so every dollar spent by a super fund must satisfy the Best Financial Interest Duty.
As a result of these troubling answers, I have provided detailed questions on notice to APRA. APRA should reverse its position in its answers on notice. It should assure the public they are not giving a green light to the use of interposed, secretive structures.
We must also see further detail on how insider trading has occurred inside the super funds and whether the existing laws are strong enough to deliver prosecutions. Superannuation is other people’s money. It’s time the funds and regulators started treating it as their own.
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