Are super funds’ investment into ISH marketing or investment?
The prudential regulator has indicated that while its expenditure review looked at superannuation funds that made payments to Industry Super Australia (ISA), it did not look at investments made into ISA’s parent company Industry Super Holdings (ISH).
During a parliamentary hearing, Liberal Senator Andrew Bragg probed the Australian Prudential Regulation Authority (APRA) on whether it had considered investments into ISH as marketing expenditure, given it also owned The New Daily, and therefore needed to be looked at under the new best financial interests test.
APRA executive director for superannuation, Suzanne Smith, said funds contributed ISA under contractual arrangement services and were not putting funds directly into ISH.
“ISH is an investment that they hold. I think when we spoke last time Senator Bragg we talked about that as being part of the investment decision that they would make as part of their investment strategy,” Smith said.
“The payments to ISA will be a contract that they have and those arrangements will cover advertising in a different collective advertising and campaigns that will be run.”
Bragg argued that given super funds put money into ISH, which was members money, it indirectly funded The New Daily.
“The shareholders of ISH and the founding shareholders – they contributed to that a long time ago. They now have an investment in ISH. ISH generates revenue from IFM, which is the investment, one of the subsidiaries which is the most profitable part of that. So, profits will flow from IFM to ISH. We don't have any record of funds further money into ISH,” Smith said.
“The expenditure review was undertaking expenditure for marketing, sponsorships and advertising. Putting capital into an investment is different – we didn't look at investments. As part of this review, we looked at expenditure on marketing, advertising and sponsorships of which there are contracts with ISA – they were captured.
“What we will be doing is there's a new test as of 1 July, which is the best financial interest duty, but funds now need to be held to account to and we need to look at how the expenditure that they're using on marketing and advertising will be in the best financial interests of members, that expenditure is under contracts with ISA for services.”
When Bragg asked whether funding The New Daily would pass or fail the best financial interests tests, Smith said it was APRA’s understanding that no funds were contributing any money directly to The New Daily and that the publication was a subsidiary of ISH.
“On that basis, if I was a super trustee, and I was putting money into any investment called Industry Super Holdings or something else, and that was funding then something else through a subsidiary, then I could do anything. Because your argument here because your argument here is an argument about subsidiary companies and the use of, of corporate structures,” Bragg said.
Smith said APRA did not regulate ISH or ISA but they regulated super funds and the way the funds made decisions around investments.
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