HUB24 stands by governance process as APRA adds licence conditions on its trustee

HUB24 says it stands by its investment governance and monitoring process which it describes as “robust” and aligned with best practice principles, as APRA adds additional licence conditions to its outsourced trustee it is in the process of acquiring.

APRA announced additional licence conditions on HTFS Nominees on Friday over concerns related to its investment governance and member outcome frameworks and practices, including oversight of platform investment options made available to super fund members.

HTFS acts as trustee for HUB24 Super Fund, which has approximately 165,000 member accounts and over $55 billion in funds under management.

HUB24 is in the process of acquiring the trustee from EQT Holdings, subject to regulatory approvals. APRA said the licence conditions will apply even after HUB24 takes full ownership.

A HUB24 spokesperson said the group’s investment governance and monitoring process is “robust and aligned with best practice principles”.

“HUB24 supports APRA’s focus on strengthening trustee governance and enhancing consumer protections and these licence conditions were anticipated, following APRA imposing licence conditions on [Equity Trustees Superannuation Limited] in December,” the spokesperson said.

“We are in regular engagement with APRA as part of this process and given our strong governance track record and the significant growth in scale and capability across the HUB24 Group, we are well positioned to continue to support the best interests of HUB24 Super Fund members as we take on and uplift these responsibilities.”

The APRA review identified deficiencies in HTFS’ onboarding processes and practices for new investment options, investment option monitoring and reporting, management of conflicts of interest and approach to member outcomes.

APRA said HTFS must refrain from onboarding certain new high-risk investment options to its platform until an independent expert confirms the option has gone through an adequate onboarding process and an accountable person attests that all reasonable steps were taken to ensure the option is in members’ best financial interests.

The additional licence conditions follow APRA’s thematic review launched last year which conducted oversight of investment governance, strategic planning and member outcomes practices of superannuation platform trustees that offer platforms.

APRA chair John Lonsdale said this is the fifth platform trustee that APRA has taken enforcement action against which reflects the regulator’s sustained focus on addressing prudential weaknesses identified through its oversight work.

“Alongside enforcement action, APRA is closely supervising other in-scope platform trustees where improvement is necessary,” Lonsdale said.

“APRA will continue to oversee the delivery of required actions and will hold trustees to account where they fail to make timely and sustainable improvements to investment governance and member outcomes. As part of this ongoing focus, we will also consider whether further enhancements to the relevant prudential standards and guidance are necessary.”

This has resulted in additional licence conditions on trustees involved in onboarding the Shield and First Guardian master funds – Netwealth, Macquarie, Equity Trustees and Diversa Trustees – which have all faced similar onboarding and oversight requirements of high-risk investment schemes.

Neither fund was offered on the HUB24 platform and CEO Andrew Alcock told Professional Planner both products failed to meet the platform’s due diligence process.

Netwealth and Macquarie have remediated Shield and First Guardian investors, but Diversa Trustees and Equity Trustees are fighting allegations of due diligence failures in court, with the latter being in separate proceedings for onboarding both funds.

Diversa and Equity Trustees were trustees-for-hire for multiple platforms that offered the funds.

Equity Trustees published a submission to Treasury’s consultation on trustee standards where it defended the trustee-for-hire model and called for stronger enforcement and regulation of lead generators and financial advisers.

Investments in Shield and First Guardian grew due to a sophisticated network of lead generators that contacted people who used online “superannuation health check” advertisements and applied high-pressure sales tactics to refer them to financial advisers.

ASIC acted against the Shield and First Guardian funds over concerns that investor money was being misused on high-risk investments, pet projects of directors and personal expenses, and court proceedings against both funds are ongoing.

ASIC has acted against advisers and licensees allegedly responsible for distributing the funds, but has also acted against the trustees that onboarded the funds and SQM Research which was the researcher that gave the funds an “investable” grade.

The government has launched multiple consultations to change the law to add further consumer protections, covering trustee oversight, lead generators, managed investment schemes and the sustainability of the Compensation Scheme of Last Resort.

The three simultaneous consultations covering platform trustees, the CSLR and lead generators closed last week.