AMP hit with penalty following BOLR class action
The Federal Court has handed down a penalty to AMP after it found the wealth giant was not authorised to make immediate changes to its buyer of last resort (BOLR) scheme.
Justice Mark Moshinsky has ordered that AMP pay Equity Financial Planners, the lead applicant in the Corrs Chambers Westgarth-led class action, $814,944.76 and over $151,000 in interest.
Sample group member, Wealthstone, will receive $151,533.51 and just over $17,000 in interest. Wealthstone’s contract in AMP’s BOLR scheme has also been voided by the Federal Court.
AMP has 28 days to pay the respondents.
The parties are now in the process of determining the impact of other group members and how many practices have BOLR in their contracts.
Other members of the class action will have to wait longer for information on any potential compensation, and this will require another judgment for the remaining group members.
In July, the court found Equity Financial Planners and sample group member Wealthstone suffered losses of $813,560 and $115,533 respectively when the August 2019 changes were made.
Under those changes, AMP cut payments to financial planners under its AMP Financial Planning (AMPFP) umbrella to 2.5 times the value of its ongoing revenue. Prior to the changes, the rights were valued at four times the sum of its ongoing revenue.
Its grandfather revenue plan was also changed from four times to 1.42 times, with a further plan to continue reducing the figure per month until it reached zero by January 2021.
There was evidence the changes had been made in light of the market environment following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The changes also impacted those who submitted a BOLR application prior to the changes, which meant they had to continue under the new figures and could not withdraw without AMPFP’s consent.
In July, following the Federal Court’s decision, AMP released an ASX statement that it was reviewing its options.
“Noting the complexity of the matter, AMP is reviewing the judgment in detail to determine the full effect of the judgment and its next steps. AMP will provide an update in due course,” it said.
In its full-year results, it announced it has set aside $50 million in provisions for the case, a sum that AMP chief executive Alexis George said was the firm’s “best estimate of the judgment”.
This article first appeared on Money Management's sister title, Lawyers Weekly.
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