Finland’s Financial Supervisory Authority is investigating whether the managing director and board members of Local Tapiola Pension failed to abide by the local law on mutual pension insurance companies in 2013, according to a report by local news daily Helsingin Sanomat.
Local Tapiola Pension was the predecessor of €19.4bn Elo Mutual Pension Insurance, launched together with Pension Fennia on 1 January.
The draft resolution prepared by the Financial Supervisory Authority reportedly lists seven accounts of misconduct by Local Tapiola Pension’s management and board in 2013.
The supervisory authority is still working on the confidential draft, according to Helsingin Sanomat.
The news daily quoted the draft as saying: “The initial understanding of the Financial Supervisory Authority is that the board and managing director [of Local Tapiola Pension] did not run the mutual pension insurance company professionally, following the principles of sound and prudential corporate conduct and reliable corporate governance, as stipulated in the ninth article of the law on pension insurance companies.”
One of the allegations is that Local Tapiola Pension used the funds of the company in a way that did not abide by pension insurance company law, which stipulates that companies must invest their assets in a “profitable and prudential manner”, and forbids them from using their funds for purposes unrelated to work pensions.
The authority is investigating whether Local Tapiola Pension’s retirement funds were transferred to Local Tapiola’s non-life insurance company using overpriced service contracts.
The mutual pension insurance company allegedly bought technical and personnel services with tens of millions of euros from the other companies of Local Tapiola Group over 2013, as it did not have the necessary networks and technology of its own.
The purchases focused on acquiring new customers as well as maintaining customer relations, human resources and financial administration.
The authority is also investigating whether Local Tapiola Pension provided the watchdog with all relevant information regarding these liabilities, before merging with Pension Fennia, as the data could have affected the authority’s take on the merger, as well as the conditions on which the merger was agreed.
Local Tapiola Pension’s managing director in 2013, Satu Huber, who is currently the deputy managing director at Elo, denied the allegations in a statement.
“The view of the previous management of Local Tapiola Pension is that there exist misunderstandings, and no malpractices have taken place,” Huber said.
She also noted that Elo’s board and the previous management of Local Tapiola Pension have given a thorough and detailed response to the authority’s inquiry.
“We are sorry the issue became public before the inquiry was completed,” she added.
The spotlight fell on pension fund governance in Finland in late 2013 after a management scandal at the country’s largest pension fund, Keva.
Merja Ailus, then the managing director, resigned following media accusations that, among other things, she had charged the institution for some personal expenses.
Keva’s investigation concluded that its guidelines for fringe benefits were insufficient and that good corporate governance had not always been followed.
New rules on transparency for private sector providers in Finland’s earnings-related pension system moved a step closer after the government submitted a bill to Parliament in August.
The Ministry of Social Affairs and Heath said that, when passed, the new law would require pension insurance companies to hold an insider register of board members and their substitutes, chief executives and their deputies, auditors and employees able to influence the company’s investment decisions.
The new governance law is set to come into force by 1 January 2015.