The Federal Court has ordered AMP to pay a $5.175 million penalty after the court found AMP failed to take reasonable steps to ensure its financial planners complied with the best interests duty and related obligations under the Corporations Act.
“ASIC had a strong case against AMP, we now have a decision from the Court which agrees with ASIC’s case that AMP failed to monitor and supervise its financial planners properly and in accordance with its legal obligations,” said ASIC Deputy Chair Daniel Crennan QC.
“ASIC believes the penalty applied by the Court today will act as a deterrent to AMP and other financial institutions to engage in such misconduct. AMP and other financial institutions must act in their clients’ best interests.”
In its judgment, the Court noted that “this penalty proceeding reflects a lamentable failure of corporate will to take the necessary steps to prevent greedy and unlawful conduct taking place, and a further failure to adopt a swift and proper remedial response”. Justice Lee accepted ASIC’s submission that during the relevant period AMP did not have an adequate ‘culture of compliance’.
In its decision, the Court noted that the rewriting conduct by one of AMP’s financial planners, Rommel Panganiban, was ‘morally indefensible’. The Court accepted ASIC’s case that, having become aware of Panganiban’s conduct, it was necessary for AMP to ascertain the extent of breaches by other planners to meet its legal obligations. AMP failed to do so, and the Court found, ‘the lack of an effective response is an illustration of how badly things had gone wrong within the organisation’.
The company regulator alleged that a number of AMP’s financial planners engaged in ‘rewriting conduct’ – which is providing advice that results in the cancellation of the client’s existing insurance policies and the taking out of similar replacement policies by way of a new application rather than through a transfer.
By cancelling insurance policies and advising clients to submit new applications, clients were exposed to a number of significant risks and the planners received higher commissions than they would have by simply transferring the policies.
The Court found there was a total of six contraventions of section 961L of the Corporations Act and imposed a penalty of $5.175 million. The Court also indicated that it will make orders requiring AMP to undertake a review and remediation program to ensure financial planning clients who were subject to rewriting conduct are detected and properly remediated, as well as, a forward looking compliance plan that seeks to prohibit rewriting conduct through improved communication, training and supervision by AMP of its financial planners.
This penalty handed down to AMP by the Court was determined under the previous penalty regime where the maximum penalty for each contravention was $1 million. Penalties have increased after legislation was introduced in March 2019 and will apply to contraventions that occurred after March 2019. Civil penalties have significantly increased, now to be capped at $525 million.