Why the IOOF Holdings Limited share price cratered 32% today

The IOOF Holdings Limited (ASX: IFL) share price is down 32% to $4.85  today after the financial advice and superannuation business shocked the market this morning by revealing that the prudential regulator APRA wants to disqualify its managing director Chris Kelaher, chairman George Venardos, chief financial officer David Coulter,  company secretary Paul Vine, and general counsel Gary Riordan from working in the APRA regulated superannuation industry.

The proceedings seeking disqualification orders against pretty much the entire leadership team of IOOF are related to alleged breaches of the Superannuation Industry (Supervision) Act 1993. 

IOOF has stated that it’s “disappointed” in APRA’s decision to bring proceedings and intends to vigorously defend them in court.

In its market announcement IOOF did not disclose what alleged breaches the proceedings were related to, but did report “that the historical matters the subject of proceedings were disclosed to APRA a number of years ago”.

Back in 2015 IOOF admitted to not reporting “significant” breaches to the regulator of operational policies and procedures that affected clients, and at the time agreed it would put in place significant remediation procedures.

In its announcement today IOOF also claimed it “has already addressed” or “is addressing” the historical matters “and has been constructively working with APRA to this end”.

In other bad news IOOF also admitted APRA is seeking to impose license conditions on IOOF’s APRA regulated entities which at a minimum probably means rising risk, compliance and monitoring costs.

Recently, IOOF Holdings completed the $1 billion acquisition of Australia & New Zealand Bank’s (ASX: ANZ) OnePath financial planning and advice business.

If its senior management team is disqualified from running APRA regulated businesses it could be disastrous for the group as a whole, which is why the company has lost around one third of its value on this news.

The increased regulatory heat in Australia is also related to the recent Hayne Royal Commission into financial services where IOOF was also grilled about its approach to financially compensating unitholders in a super fund that were adversely affected by an operating error.

Motley Fool contributor Yulia Mosaleva has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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