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The Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) today announced that APRA has given directions to MBF Life Limited (MBF Life) and that ASIC has accepted an Enforceable Undertaking (EU) from MBF Life and ClearView Life Nominees Pty Limited (ClearView)in relation to certain life insurance and superannuation products.
The directions and EU follow the incorrect allocation of external management fees by MBF Life and ClearView in the unit prices of some products over several years. MBF Life promptly reported the errors once identified. There is no evidence that the incorrect allocation was deliberate, and MBF Life and ClearView have fully cooperated with both regulators.
The directions issued by APRA, under the Life Insurance Act 1995, require MBF Life to compensate investors in the affected products and to obtain an independent external review of its unit pricing processes to ensure that similar issues do not recur.
APRA Deputy Chairman, Mr Ross Jones, said that industry should consider independent expert reviews of unit pricing systems as part of its risk management practices.
‘APRA would not expect an issue like this to recur within an institution and employing an independent expert would help eliminate the possibility of that happening’, he said.
The EU, accepted by ASIC under the ASIC Act 2001, requires MBF Life and ClearView to do all that is reasonably necessary to ensure affected investors are identified, properly notified of the errors, and correctly and promptly compensated. There is an exception for some affected investors to whom compensation less than $20.00 is payable, although these investors may still request to be compensated. The EU also requires MBF Life and ClearView to report to ASIC.
‘ASIC was concerned to ensure that the interests of investors were not in any way compromised by the incorrect allocation, and that investors were appropriately compensated for the errors’, ASIC Executive Director of Enforcement’, Ms Jan Redfern said.
APRA and ASIC have agreed with MBF Life and ClearView on the method by which investors will be compensated. MBF Life and ClearView will contact affected investors in due course with details of the compensation arrangements.
The two regulators are also developing a joint regulatory approach to assist industry participants to understand and meet their unit pricing obligations.
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