Australia’s financial watchdog has ordered Cbus, one of the country’s largest superannuation funds, to conduct an external review related to its close ties to a construction union facing serious allegations of misconduct.
The Australian Prudential Regulation Authority said in a statement it had imposed additional license conditions on the trustees of Melbourne-based Cbus, which manages A$93 billion ($62 billion) of assets, and smaller fund BUSSQ, which is based in Brisbane.
Both funds’ boards include representatives from the Construction, Forestry and Maritime Employees Union, one of Australia’s largest, which has been under the spotlight over allegations of corruption and links to organized crime. The CFMEU is a shareholder of Cbus and has three directors on its 14-member board, while three of the union’s officers sit on BUSSQ’s board, according to the statement.
The funds must appoint an independent party to conduct a review based on requirements under regulatory standards around fitness and propriety, according to a statement from APRA on Wednesday. Both funds will be required to publish independent reports reviewing the trustees’ compliance with their “duty to act in the best financial interests” of participants, it said.
APRA “notes the recent public allegations regarding serious misconduct” within the CFMEU, it said in the statement. “While these allegations are yet to be tested or proven through a court or tribunal process, APRA is concerned about the potential impact on trustees.”
ARPA independent review
Many of the largest super funds in Australia’s A$3.9 trillion industry have their roots in the union movement and are known locally as industry funds. Australia’s compulsory retirement savings system was brokered during wage negotiations between the country’s biggest unions and employers, which resulted in firms contributing a portion of wages to retirement savings.
“APRA is prepared to take strong action to give members confidence that trustees are making decisions in their best financial interests,” APRA Deputy Chair Margaret Cole said in the statement.
Cbus said it supported APRA’s independent review. “This independent review will build on work that Cbus has previously commenced,” Cbus Super CEO Kristian Fok said in a statement, adding the fund would cooperate fully with the independent reviewer. “We note the allegations of criminal activity in the building and construction sector, and we condemn such activity,” he said.
“Our directors meet the requisite standards,” BUSSQ Chair Chris Taylor said in a statement. “APRA are seeking to use licence conditions to force a review of issues that have been examined at length by APRA over the past two years, without any negative findings.”
