One of the most senior figures at Australia’s financial services watchdog had oversight of a Suncorp division when it may have breached laws and put profits ahead of the interests of its superannuation customers.
Geoff Summerhayes, a commissioner at the powerful Australian Prudential Regulation Authority, was a director of Suncorp’s superannuation trustee from 2008 to 2015, a period in which its conduct has been scrutinised by the Hayne royal commission.
In open findings released last month – which Suncorp heavily contests – counsel assisting the Hayne royal commission said Suncorp’s trustee may have breached laws governing super, including by “[failing] to prioritise the financial interests of members”.
A Fairfax Media investigation can reveal Mr Summerhayes was also chairman of Suncorp’s now-shuttered Guardian Financial Planning division when the corporate regulator disciplined it for breaches involving poor supervision of employees, weaknesses in controls and deficient advice.
Mr Summerhayes was the named recipient of an external report on Guardian, which specialised in life insurance, conducted in early 2015 at the behest of the Australian Securities and Investments Commission (ASIC), which had the trouble-plagued advice business under surveillance.
“During our review there were a number of themes identified… [including] a ‘tick the box’ approach to compliance ie doing things for the sake of doing them… and a desire to share ‘good news’ but deal with bad news without necessarily escalating that,” states the draft report by PwC handed to Mr Summerhayes in 2015 and obtained by Fairfax Media.
Detailed questions about Mr Summerhayes’ role at Suncorp, the issues raised at the royal commission and the questionable practices at Guardian were sent to APRA.
A spokeswoman said he would not be commenting and issued a statement from APRA saying it took seriously matters that related to the integrity and probity of its staff, particularly its senior executives.
“APRA has always had amongst its leadership an APRA Member with industry experience. These appointments have been very valuable for the organisation,” it said.
APRA said there were strict rules around handling conflicts of interest and that Mr Summerhayes had not, and would not, be involved in any review of matters raised about Suncorp in the royal commission.
The 2015 report handed to Mr Summerhayes outlined ASIC’s key areas of concern about the outfit, including that it hired financial advisers who did not meet the minimum training standards, and did not properly vet their competence.
“GFP does not ensure its representatives have the necessary knowledge, skills and competence to provide financial advice to retail clients,” it said.
It also criticised the governance of the operation, saying reports to the board and governance committees ran to more than 200 pages for one hour meetings. This and other issues flagged could impact the ability of Guardian’s management and board to “effectively discharge their responsibilities”, the report said.
Another document shows that Suncorp filed breach reports against three advisors during 2014, with at least two later banned.
One Guardian advisor, Andrew Moroney, was banned for life in February 2016, due to the extent of his “churning” activities between 2006 and 2014 – repeatedly pushing clients into buying new life insurance policies to bolster his income with high upfront commissions.
Mr Summerhayes left Suncorp in September 2015, and Suncorp closed down Guardian that November. Later that month, then-treasurer Scott Morrison announced Mr Summerhayes would join APRA as a commissioner from January.
Mr Summerhayes now has responsibility for life, general and private health insurance issues at APRA. APRA was castigated in last month’s royal commission hearings over its reticent approach to enforcement.
Aside from its statement to Fairfax Media, neither APRA nor Mr Summerhayes has publicly acknowledged his connection to the Suncorp issues raised at the royal commission, and his name has not appeared in any evidence displayed at the inquiry.
Mr Summerhayes had joined Suncorp in 2008 as chief executive of Suncorp Life – which housed its life insurance, superannuation and financial planning operations, and served as a director of various Suncorp entities, including the super trustee, Suncorp Portfolio Services.
As trustee, Suncorp Portfolio Services is required by law to put the interests of super fund members ahead of those of its parent company.
Suncorp Portfolio Services may have breached that requirement, according to the royal commission’s open findings released last month.
In its response to the royal commission, Suncorp rejected all open findings against it, saying there was “insufficient evidence” to support them and some were “directly contradicted” by other evidence before the commission.
In response to questions from Fairfax Media, Suncorp said it “would not seek to pre-empt any of the Commission’s findings, and as such it would be inappropriate to comment”.
The royal commission focussed on a deal dating from 2003 to at least 2016, where Suncorp Portfolio Services paid an annual tax surplus to another Suncorp company for “additional services”, instead of – in the words of counsel assisting, Michael Hodge, QC – “[returning] it to members”.
The royal commission found that this arrangement “failed to prioritise the financial interests of members”.
The commission also examined Suncorp Portfolio Services’ transfer of member accounts into low-fee MySuper products, a process funds were meant to complete as quickly as possible after 2013.
The royal commission heard that $790 million in members’ funds was transferred just before the June 2017 deadline – actions that “may have resulted in greater fees and ongoing commission payments being deducted from [member] accounts”.
Suncorp said the payment of the tax surplus was a “proper exercise” of a trustee’s rights and that the independent directors of the trustee had “applied appropriate scrutiny”. On the MySuper transfer, it said the timing had “reduced risks to members”.
APRA’s response to the royal commission, also published this week, said it would undertake “further detailed inquiries” on the tax payments.
It did not directly address the findings on the MySuper transfers and commissions, but said it did not accept “as a blanket proposition” that super funds transferring the accounts within the deadline “is inconsistent with acting in the members’ best interest” or that “it would be appropriate for APRA to sanction a trustee for actions allowed by law”.