ASIC and Westpac: What next for General Advice and Personal Advice

The Federal Court has allowed an appeal by ASIC in relation to Westpac telephone sales and marketing. The Court found that while Westpac thought it was operating under a general advice model, in actual fact the bank was giving personal advice but was not complying fully with the personal advice requirements of the Corporations Act.

NIBA CEO Dallas Booth said, “As always, the decision applies the current law to the particular facts and circumstances before the court.  We have to be careful before we start to interpret the decision and draw conclusions that may or may not be warranted where the facts and circumstances are different.”

NIBA is getting legal advice on the potential impact of the decision on the broader adoption of general advice and personal advice models in insurance broking.  We will provide further information and background notes to Members when the advice has been received and considered.”

ASIC’s appeal concerned the Federal Court’s decision regarding the meaning of ‘personal advice’ in the Corporations Act, including the finding that Westpac subsidiaries, Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) did not provide personal advice to 15 customers in two telephone campaigns conducted by members of Westpac’s Super Activation Team.

The Full Court reversed that decision, finding that in calls to 14 of the customers, the Westpac staff did provide them personal advice, in breach of WSAL and BTFM‘s Australian financial services licences. The Full Court also found that WSAL and BTFM, by providing personal advice to their customers, failed to comply with other financial services laws in the Corporations Act, including the ‘best interests duty’.

Justice Jagot described Westpac’s conduct as, “systemic sharp practice about what must have been one of their clients’ major financial concerns, their superannuation’.”

Chief Justice Allsop stated in the judgement, “Westpac attempted, assiduously, to get the customer to make a decision to move funds to BT without giving personal financial product advice as defined in the legislation. It failed.”

Justice O’Bryan confirmed, “Westpac took unfair advantage of that asymmetry by implementing a carefully crafted telephone campaign … The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer’s superannuation fund. Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters that they should consider before deciding to consolidate their superannuation. Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision. Through the campaign, Westpac pursued its own self-interest and disregarded the best interests of its customers.”

You can download the entire judgement on the ASIC website .