Following intense scrutiny from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, AMP has conceded that its financial planning division engaged in misconduct by charging clients “fees for no service” through its buyer of last resort (BOLR) facility from 1 July 2012 to 30 June 2017.
Appearing before the commission earlier this week, Jack Regan, AMP’s group executive, advice and New Zealand, admitted that the wealth management company had misled the Australian Securities and Investments Commission (ASIC).
Mr Regan acknowledged that charging fees for no service was a “conscious business practice”, despite AMP initially reporting such incidents as “administrative oversight”.
During the hearings earlier this week, senior counsel assisting Michael Hodge suggested that AMP’s conduct was not a “process fail” but a “deliberate decision made by AMP”.
In response, Mr Regan admitted that it was “both”.
“Dodgy bankers should go to prison”
Speaking at the hearings, Treasurer Scott Morrison said: “What has occurred here and what has been admitted to in the royal commission by AMP is deeply disturbing.
“They [AMP] have said that they basically charged people for services they didn’t provide and they have admitted to statements that were misleading to ASIC and to their own customers, and this is deeply distressing.
“This type of behaviour can attract penalties which include jail time. That’s how serious these things are.”
Likewise, the Minister for Revenue and Financial Services, Kelly O’Dwyer, told ABC AM on Thursday (19 April) that the government was “very disturbed by a number of the revelations that have been revealed recently at the royal commission” and the “false and misleading statements that have been made to ASIC”.
When asked whether she believed that “dodgy bankers including chief executives should go to prison if they’ve broken the law and ripped off customers”, Minister O’Dwyer responded: “Absolutely”.
Looking forward, Mr Morrison noted ASIC’s continued investigation into the misconduct of AMP employees.
“I can confirm that that investigation has been underway for some time and that, as part of that investigation, ASIC has received many thousands of documents as it has undertaken a number of examinations of AMP staff,” the Treasurer continued.
“ASIC is also pursuing full compensation of impacted AMP clients. ASIC takes these allegations of false or misleading statements very seriously as does the government and this is a significant aspect of the investigation.”
The Treasurer also placed confidence in ASIC’s ability to handle the matter.
“ASIC’s identification of the suspected illegal conduct gives me great confidence that ASIC will continue to deal with this matter and, of course, the royal commission will as well,” Mr Morrison said.
“I am very reassured by the fact that these matters were already being pursued by ASIC and will continue to be pursued by ASIC.”
Mr Morrison added that the government had recently granted ASIC “greater resources” and that he believed ASIC would continue to “get on with their job of dealing with what are very serious admissions by AMP at the royal commission”.
Ms O’Dwyer likewise said: “The government has strengthened the powers of the regulator to be able to do its job because we don’t want to see misconduct in the financial services sector.
“It is not acceptable behaviour and it is for them to explain how they are going to regain the trust of their customers.”
She continued: “We want people to be able to have confidence that when they get advice that it’s advice in their best interest, which again is one of the reasons why the government has put in place new standards for financial advisers through the Financial Advisors Standards and Ethics Authority and why we’re mandating new education and training requirements and a code of ethics and a national exam.”
The government also recently appointed a new deputy commissioner of ASIC with responsibility for enforcement, Dan Crennan QC.
The first two days of the second round of hearings largely focused on misconduct at AMP.
The executive general manager of Commonwealth Private and the former EGM of the CBA wealth management business, Marianne Perkovic, provided evidence to the commission in the middle of the week. Two financial advice subsidiaries of the Commonwealth Bank recently entered into an enforceable undertaking with ASIC over fees charged for advice that was not provided. The bank admitted at the time that it had “failed” its customers. The subsidiaries will make a community benefit payment of $3 million in total.
Witnesses from Westpac and ANZ are expected to close off the hearings this week.
Mortgage Business’ sister title, ifa, is running a live blog for the duration of the second round of hearings for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
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Charbel Kadib is the news editor on the mortgages titles at Momentum Media.
Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.