IOOF facing shareholder class action

The claim has pointed to non-disclosures and “misleading and deceptive conduct”, detailing insider trading, staff cheating on exams and breaches of trustee duties occurring between 1995 to 2015.

By failing to disclose the alleged misconduct between 1 March 2014 and 7 July 2015, Shine said the wealth group breached its continuous disclosure obligations and may have engaged in misleading and deceptive conduct. 

The law firm reported it has completed “extensive” investigations into the company’s behaviour, with it having obtained a Federal Court order for IOOF to produce relevant documents. 

Fairfax first published articles on IOOF’s purported misconduct in June 2015, including allegations of misbehaviour within IOOF’s research department, which provides services to IOOF’s dealer network, managed funds and super funds. 

Following the articles in the Sydney Morning Herald, on 22 June that year, IOOF shares experienced a 13.3 per cent drop, down $1.42, as reported by Shine.

IOOF managing director at the time, Chris Kelaher, appeared before a Senate hearing to respond to questions about the alleged misconduct and he admitted the group had not reported serious past allegations of insider trading and front-running by senior staff to ASIC.

Following Mr Kelaher’s confession, IOOF’s share price dropped by another 29 cents. 

In August 2018, the managing director along with other IOOF executives were questioned again in front of the royal commission. The questioning revealed that IOOF’s Questor subsidiary had disadvantaged members of a super fund compared to private investors. 

After Mr Kelaher’s appearance in the commission, the company’s share price fell by a further 6 per cent.

APRA launched proceedings against the group over its treatment of its super fund members, as found by the royal commission, which ultimately saw Mr Kehaler resign from IOOF. The regulator’s action was eventually unsuccessful.

As of mid-February, Shine noted, the financial services provider is trading at $7.05, almost 34 per cent below its share price immediately prior to the Sydney Morning Herald articles being published in June 2015.

Shine Lawyers’ class actions practice leader Craig Allsopp, who was formerly a senior lawyer in ASIC’s enforcement area, commented the new class action is unrelated to the APRA claim and focuses on misconduct between 2009 to mid-2015.

“IOOF shareholders have repeatedly seen the value of their shares wiped out by numerous alleged failures of IOOF’s management over several years,” Mr Allsopp said.

“I’m glad to be pursuing a solution for the many people affected by IOOF’s alleged misconduct.”

IOOF on the other hand, has noted the action is yet to be filed, with a spokesperson commenting: “IOOF does not comment on the speculative actions of legal firms that are seeking expressions of interest from IOOF shareholders in joining a potential class action.”

Shine has invited shareholders who bought IOOF holdings between 1 March 2014 and 7 July 2015 to register for the action.

It has kicked off almost a year after Quinn Emanuel Urquhart & Sullivan filed a similar lawsuit on behalf of investors who purchased shares between May 2015 and December 2018.

Maurice Blackburn launched a suit in 2015 based on the same premise, using documents that whistleblowers had also shared with Fairfax, ASIC and the Senate.

The Victorian Supreme Court restrained the class action from moving forward after IOOF then sued Maurice Blackburn seeking the return of the confidential documents handed to the firm by four former employees.

At the time, Maurice Blackburn principal Jacob Varghese said the case highlighted the "extreme inadequacy" of Australian law to deal appropriately with whistle-blower information.

"The fact that IOOF sued Maurice Blackburn and no one else shows that this case was motivated for the sole purpose of stopping our firm from holding IOOF to account on behalf of shareholders," Mr Varghese said.

"We still firmly believe IOOF did the wrong thing and should be held to account and that the reason it fought so hard was to avoid the scrutiny a class action would bring."

But Mr Kelaher commented the decision confirmed IOOF's position.

"We have always maintained that the proposed class action was misconceived both factually and at law," he said.

Litigation Lending is funding the Shine action. Its chief executive, Stuart Price stated: “Class actions like the IOOF class action require the management of financial services companies… to account for alleged failures, and promote good corporate governance within the sector.”