The Australian Securities and Investments Commission (ASIC) has announced that AMP has been ordered by the Federal Court to pay $5.175 million penalty after failing to ensure that’s its financial planners complied with the best interest duty and related obligations under the Corporations Act.
Also, the court found that there was a total of six contraventions of the Act and indicated that it would make orders requiring AMP to undertake a review and remediation program to ensure financial planning clients who were subject to rewriting conduct were properly remediated.
“ASIC had a strong case against AMP, which resulted in AMP’s admissions in relation to ASIC’s case in May last year. 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,’ ASIC deputy chair Daniel Crennan said.
ASIC 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.
Further to that, the regulator said 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.
Additionally, the court said 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 Mr Panganiban’s conduct, it was necessary for AMP to ascertain the extent of breaches by other planners to meet its legal obligations,” ASIC said in the announcement.
“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’.”
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’.