The IOOF Holdings Ltd (ASX: IFL) share price has fallen 2% this morning after the company provided an update on license conditions imposed by APRA.
What did IOOF announce this morning?
The licence conditions in the announcement relate to IOOF's three APRA Regulated Entity subsidiaries (AREs) and cover initiatives which are underway or completed.
A summary of the conditions was published in December 2018 and a further update on their status provided as part of the half-year results presentation in February 2019.
IOOF management said that the AREs are committed to meeting the licence conditions and said that the AREs have made significant progress toward doing so.
An independent reviewer was engaged by IOOF to review the status and quality of compliance with the licence conditions identified 76 actionable items within the overarching initiatives for the period to 31 March 2019.
72 of the 76 items have been completed or substantially completed, while four items relating to one initiative remain 'in progress'.
Management said that as at 31 March 2019, the reviewer had found that:
- IOOF is demonstrating genuine commitment to governance uplift within the organisation
and fostering a cultural environment that is consistent with this uplift. - Positive steps towards the implementation of an OST have been taken and the foundations
of this dedicated business function established. - The ARE Boards and senior management have demonstrated that they are committed to
providing the OST with the necessary funding to ensure a well-functioning and sustainable
OST. - The head of the OST has effectively engaged with appropriate governance functions
across IOOF and the reviewer expects this to occur in an effective manner going forward
for the OST.
In reviewing progress against the various initiatives, the Independent Reviewer found that the OST had not been 'implemented' from 31 March 2019 and remains 'in progress', with IOOF's subsidiaries since being issued 'show cause' notices by APRA.
Should you buy IOOF shares?
Today's announcement isn't good news for IOOF or its investors, particularly given the preliminary finding that the subsidiaries may have been in breach of their licence conditions.
Financial services investors saw their investments plummet lower in 2018 amid the revelations from the Financial Services Royal Commission.
I'm of the view that the share prices of IOOF and fellow wealth manager AMP Limited (ASX: AMP) have further room to fall in 2019 as the risk of class actions, payouts and government intervention loom large in the sector.
The IOOF share price is still down 29.3% in the last 12 months and I think growth investors could look at this top-rated stock in 2019.
