During the second round of hearings, the senior counsel assisting the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry suggested that criminal prosecution against AMP be initiated following evidence of misconduct.
Rowena Orr QC made the suggestion during the closing remarks for the royal commission’s financial advice and wealth management hearings.
Turning first to the evidence of AMP Group executive, advice and New Zealand Jack Regan, Ms Orr said that the executive had admitted to conduct that was “unlawful and ethically and morally wrong”.
She also reminded Commissioner Hayne that AMP has made “20 false and misleading statements in 12 communications” to ASIC. Purposefully misleading a regulator is tantamount to a criminal offence under the Commonwealth Criminal Code.
Specifically, Ms Orr described AMP’s claims that Clayton Utz’s review of AMP’s buyer of last resort (BOLR) policy was “independent”, were actually “materially incorrect” and were intended to deceive the regulator.
She described the conduct of AMP as “unconscionable”.
Since the revelations were made public during the royal commission, the chief executive officer, Craig Meller, had brought forward his retirement with immediate effect, “taking accountability as the issues in the advice business had occurred during his tenure as CEO.
On Sunday, 29 April, Catherine Brenner resigned from the board, “accepting accountability, as chairman, for governance”. It has since been announced that David Murray AO, a former CEO of Commonwealth Bank of Australia, will take up the position after the upcoming AGM, on or before 1 July 2018.
AMP “does not accept all of Counsel Assisting’s open findings”
In a statement released on Friday (4 May), AMP said that the full board had “acknowledged accountability for the failings in governance” and elected to take a cut in directors’ fees of 25 per cent for the remainder of the 2018 calendar year.
The group issued the following statement: “AMP accepts further board renewal is necessary and is committed to a measured program of change. This includes fast-tracking the selection of a chairman and appointment of a new non-executive director to help accelerate cultural change and to further strengthen governance.”
A workplace investigation commissioned by the board remains ongoing and will reportedly be used to determine any disciplinary consequences for individuals involved.
However, AMP has hit out against the criminal offence claim.
AMP said that while it “takes responsibility for its past failings and has taken steps to ensure that these failings do not recur”, it “does not accept all of Counsel Assisting’s open findings.
“AMP strenuously denies the allegation by Counsel Assisting that it is open to find that AMP has committed a criminal offence in providing the Clayton Utz report to ASIC,” it said.
According to the group, the investigation by law firm Clayton Utz into the fee-for-no-service issue was an “uncompromisingly direct 87-page review of the conduct of the advice business”.
The statement reads: “Criticism has been leveled at AMP regarding the way in which the Clayton Utz report was produced.
“In AMP’s submission to the royal commission, we assert that:
- there is no evidence to suggest that the board, including the former chairman and former CEO, acted inappropriately in relation to the preparation of the report;
- the board was not aware of the nature and extent of the interaction during the preparation of the report;
- there is also no evidence that Clayton Utz made any changes to the report that they did not agree with or that they do not stand behind the report; and
- the extent of interaction between AMP and Clayton Utz has been overstated.
“Irrespective of the criticism surrounding the production of the report, it was an important and powerful catalyst for the actions AMP has taken and is taking to address the challenges in the advice business,” AMP said.
The financial services group later accepted that “misrepresentation, even if inadvertent, to ASIC is unacceptable and must be corrected as soon as it becomes apparent”.
However, it said that the number of separate misrepresentations referred to in the royal commission had also been overstated.
“There were seven misrepresentations (in 12 communications). These were not new ‘news’. We had reported them in detail to ASIC in October 2017 and then to the royal commission in evidence provided in March 2018,” AMP said on Friday.
AMP went on to say that the issues raised in the fee-for-no-service case study also concerned matters that are “almost entirely the subject of an ongoing ASIC investigation”.
It said: “As AMP understands, ASIC was nearing completion of that investigation at the time the royal commission hearings commenced. AMP fully expects ASIC will deal with the serious matters being investigated in an appropriate manner consistent with ASIC’s enforcement priorities and under a proper process with any affected parties having had the opportunity to be heard.”
It highlighted that, to date, for the broader licensee fees-for-no-service issue, AMP has remediated 15,712 customers a total of $4.7 million.
Reputation now in “tatters”
A report by Morningstar analysts has outlined a litany of obstacles that AMP will be facing thanks to the “shocking revelations”.
“AMP’s poor corporate governance and risk management has now materially impacted AMP’s reputation as a trusted financial adviser,” the report said.
“We believe its strategy to focus investments and grow its wealth management business is now in tatters as a result of the royal commission.”
Four separate shareholder class actions are also now being lined up against the group, on the grounds that the company breached its obligations to customers and engaged in “misleading and deceptive representations to the market”.
[Related: ‘Golden age’ of banking is over: ANZ CEO]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.