The Australian Prudential Regulation Authority (APRA) yesterday gained Federal Court orders against the trustee directors of the Wes Lofts (Aust) Superannuation Fund over the employers improper use of members funds. The proceedings were brought by APRA under the Commonwealth Superannuation Industry (Supervision) Act 1993.

Following APRAs application to the Court, Wes Lofts, Geoff Leek and Bernie Kenny, as directors of Wes Lofts Superannuation Pty Ltd, consented to orders declaring that they had procured the contraventions of the in-house asset rules for the Wes Lofts (Aust) Superannuation Fund over three years to 30 June 2000 and that Wes Lofts and Bernie Kenny, as directors of Wes Lofts Superannuation Pty Ltd, had procured the contraventions of the in-house asset rules for the Fund for the year to 30 June 2001.

The Court also declared by consent that for the years ended 30 June 2000 and 30 June 2001, the trustee had entered into a scheme to artificially reduce the level of the Funds in-house assets.

The breaches arose out of the use of employees superannuation to fund the business activities of Wes Lofts.

The in-house asset rules prohibit a superannuation fund from investing more than 5 per cent of the funds assets into an employer sponsor of the fund. They are designed to protect members from losing a large part of their retirement savings in the event that their employer fails.

At 30 June 2001, the Wes Lofts (Aust) Superannuation Fund had about 50 members and total assets of $1.7 million. Of that amount, about $690,000 had been lent back to the employer sponsor or invested in an associated unit trust.

APRAs General Manager, Coordination, Rehabilitation and Enforcement, Bill Gole, said, "Under the terms of settlement, Wes Lofts Superannuation Pty Ltd has agreed to provide security to the Fund for the outstanding loans and will ensure that the level of in-house assets is reduced to less than 5 per cent by 31 March 2002.

"Mr Lofts and the other Respondents are to provide weekly reports to APRA on progress in repaying the in-house assets, and they have agreed that civil penalties will apply in the event that any of the terms of settlement are breached."

As a result of this action, Wes Lofts and Bernie Kenny, as directors of the superannuation fund trustee (and Geoff Leek as a past director) are "disqualified persons". That means they are permanently prohibited from holding the positions of superannuation fund trustee, investment manager or custodian.

Mr Gole said, "APRA is acting vigorously to protect the interests of members of this small superannuation fund. Employers and trustees need to understand that superannuation is meant to provide a retirement benefit for fund members, not ready financing for the employers business enterprises.

For more information contact:

Gloria Peterson Public Affairs Manager 02 9210 3385 or 0419 250 286