Four separate class actions are being lined up against AMP on the grounds that the company breached its obligations to customers and engaged in “misleading and deceptive representations to the market”.
The legal action comes after senior AMP executives have appeared before the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to give testimony regarding misconduct relating to financial advice, with them admitting to a number of potential crimes and suggesting that these were repeatedly mischaracterised to the Australian Securities and Investments Commission (ASIC) and to its customers as being “administrative errors”.
These included providing false and misleading statements to the regulator and charging customers for services that were not provided.
The ASX-listed lender, which recently announced the immediate resignation of its CEO and apologised “unreservedly for the misconduct and failures in regulatory disclosures”, has lost more than $1 billion in shareholder value since March and could potentially face criminal charges.
At its AGM on Thursday (10 May), AMP confirmed that it had been served with two class action proceedings: a claim filed in the Supreme Court of New South Wales by Quinn Emanuel Urquhart & Sullivan, and a claim filed in the Federal Court of Australia (Victorian Registry) by Phi Finney McDonald.
The former is on behalf of shareholders who acquired an interest in AMP’s shares between 10 May 2012 and 15 April 2018, while the latter is on behalf of shareholders who acquired an interest in AMP’s shares between 6 May 2013 and 13 April 2018.
“AMP intends to vigorously defend the proceedings,” the group said.
Loss of female directors “highly regrettable and unintentional”
During the AGM, AMP interim executive chairman Mike Williams said that the group’s 169-year history had created a “profoundly positive impact on the lives of its customers and the wider community, helping them to achieve their financial goals”, so the current scandals had been “exceptionally difficult for AMP” and its shareholders, customers, advisers and employees.
“It is only right that I begin by reiterating and reaffirming our unreserved apology. We are truly sorry,” Mr Williams said.
“The issues highlighted in our advice business are unacceptable. We let you down. We have let our customers down. And we have let the wider community down. We understand you want change. And we understand you want answers. We want to address your questions head-on so we can move forward.
“We are determined to do everything we can to restore the trust of our customers and of all Australians.”
However, Mr Williams said that “no organisation should consider itself immune from such failings”, adding that AMP had been affected by “a small number of individuals in [its] advice business [who] made the decision not to follow policy, and inappropriately charged fees to customers where no service was provided”.
“The situation was compounded through a series of communications that misrepresented the issue to — and therefore served to mislead — our regulator on several occasions.”
He said: “Let me be clear. From my perspective, the number of misrepresentations is not what matters. In my view, one misleading statement is one too many. Trust means honesty, even when the news is bad. On both counts, the behaviour was absolutely unacceptable.”
The interim chairman went on to highlight that there are a number of investigations still ongoing into advice and AMP has “established a program of work to review the nature of ongoing fee arrangements between advisers and customers and to address any incidence of inappropriate advice”.
Mr Williams concluded: “We’ve heard loud and clear that you want change. Importantly, that change is already happening — and happening at pace.
“The board has accepted accountability. To date, some 50 per cent of the board has left or is leaving.”
He added that it was “highly regrettable and unintentional” that it had “lost all [of its] female directors through this process” and that the group believed it was “critical” to achieve the “right balance of gender diversity and financial services experience”.
At the AGM, Mr Williams said that AMP was in the “much-needed process of resetting our relationship with regulators” and was “injecting a greater sense of urgency to affect change”.
“The workplace investigation to understand accountabilities for the issues in the advice business is nearing completion,” Mr Williams said.
“We intend to exercise tough sanctions for any individuals found to have acted inappropriately and against our code of conduct.”
He emphasised that the current issues do not detract from the importance of quality financial advice.
“Advice remains a cornerstone of our business,” Mr Williams said.
The interim chairman concluded: “I know that immediate action is required to reset our business and we are doing everything we can to accelerate the change already underway. But I also know that actions speak louder than words and I can assure you that we’re implementing a decisive series of measures to steer the business back on course and to restore your belief in AMP.
“Yes, we have work to do, but AMP is committed to putting our customers at the core of everything we do, improving our culture and driving change across the business. The AMP of the future will be very different from the AMP of today. But we’ll remain true to our founding purpose of helping our customers when they need us most.
“AMP can — and will do — everything necessary to win back our company’s respect and trust, and to deliver for you, our shareholders, and all of our stakeholders.”
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.