In a judgement handed down on 20 September 2022, Moshinsky J of the Federal Court held in favour of the Australian Securities and Investments Commission (“ASIC”) against member companies of the AMP group in Australian Securities and Investments Commission v AMP Financial Planning Proprietary Limited  FCA 1115 (“ASIC v AMP”). Notwithstanding that AMP admitted the allegations and has been on a remediation pathway over several years, it has been fined $14.5 million and is required to publish an adverse publicity notice on its websites for one year. This case is a continuation of the harsh penalties imposed on financial services providers for charging fees in situations where their mandate to do so has ceased. In this case, it was for superannuation members in a corporate superannuation scheme where those members had left their employer and could no longer access advice services.
The case involved an action by ASIC against five separate companies which were part of the AMP Limited group of companies. The action arose out of a major review undertaken by ASIC released 27 October 2016 entitled REP 499 Financial advice: Fees for No service in which it identified a number of Australia’s most significant financial services providers with a particular focus on banking institutions.
The misconduct in question occurred between July 2015 and September 2018 where AMP deducted $356,188 in fees even though it was aware the member had ceased their employment and could no longer access their advice services.
In handing down his decision, Moshinsky J concluded that AMP’s conduct was extremely serious and systemic, leading to contraventions that occurred repeatedly over an extended period of time. Justice Moshinsky commented, “In relation to “corporate culture”, I consider that the failure to investigate whether or not there was a systemic issue, despite many complaints, over a lengthy period of time, reflects very poorly on the defendants (in particular, AMP Life).
It is surprising and concerning that repeated complaints that the PSF had been wrongly debited from the superannuation accounts of members who had ceased employment with their employer-sponsor did not lead anyone within the defendants (in particular, within AMP Life) to question whether there was a systemic issue.”
Although AMP has remediated $691,032 to affected customers, the Court found AMP failed to investigate whether or not there was a systemic issue, despite many complaints over a lengthy period of time.
By charging fees for no service and failing to have internal procedures and controls in place to prevent this kind of misconduct, the Court found that AMP also breached its obligations as an Australian financial services licence holder to act efficiently, honestly and fairly and to comply with financial services laws.
ASIC has taken a number of court actions and acted to ensure remediation for consumers arising out of the fees for no service conduct, which, as at 30 June 2022, had seen some of Australia’s largest banking and financial services institutions pay, or offer to pay, $3.3 billion in compensation.
We think there are important takeaway considerations arising from this case.
Licensees are expected to be vigilant in ensuring that they have internal procedures and controls in place to prevent this kind of misconduct, and to recognise that failing to do so falls short of the standard required under section 912A(1)(A) of the Corporations Act (Cth) 2001, to act fairly, honestly and efficiently.
Superannuation trustees in particular are expected to recognise the importance of having in place strong governance, risk management and oversight processes to ensure that only authorised and appropriate fees and other charges are deducted from members’ superannuation accounts.
If you need assistance in dealing with remediation issues, or seek views on how these laws apply to you, please reach out to Cleveland & Co External in-house counsel™, your specialist outsourced legal team.
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