The Australian Securities and Investments Commission (ASIC) has sought to reinforce the fact that the $5.175 million penalty imposed on AMP Limited in the Federal Court should act as a deterrent to other major financial institutions who fail to adequately address adviser misconduct.
This point was driven home by ASIC deputy chair, Daniel Crennan QC, while ASIC at the same time pointed to the number of other best interest duty cases ASIC had brought before the courts including against Westpac and against RI Advice.
In doing so, the regulator is driving home the message that regulatory action will not stop at advisers but will be directed towards the highest levels of institutions where their failure to address bad behaviour can be proved.
This was acknowledged by Crennan who expressed pleasure that the Federal Court had agreed with ASIC’s case that AMP had failed to monitor and supervise its financial planners properly and in accordance with its legal obligations.
ASIC had alleged that a number of AMP financial planners engaged in ‘rewriting conduct’ – providing advice that results in the cancellation of a client’s existing insurance policies and the taking out of similar replacement policies by way of a new application rather than through a transfer.
This resulted in the clients being exposed to significant risks and the planners receiving higher commissions.
AMP’s problems arose because the court accepted that AMP had become aware of the problem with one planner but had failed to then ascertain the extent of the problem amongst other planners.
The bill for AMP Limited could have been higher because the Federal Court penalty was determined under the old penalty regime which applied a $1 million maximum for each contravention. There is also the question of costs.