The Australian Securities and Investments Commission (ASIC) has announced that AMP and its lawyers, Clayton Utz, have succumb to its request to hand over “internal file notes” from interviews with past and present employees in relation to fees-for-no-service breaches, which the wealth giant was scrutinised for by the banking royal commission.
ASIC sought an order in Federal Court in December 2018 compelling AMP and Clayton Utz to provide the interview notes as part of its ongoing investigation into the wealth firm’s charging of financial advice fees to customers without providing advice, as well as providing “false or misleading statements” to the corporate regulator.
AMP had admitted to the misrepresentations it made to ASIC in regards to fees-for-no-service breaches, but claimed that it notified the regulator of the breaches in October 2017 when it provided the Clayton Utz report, which addressed the wealth firm’s Buyer of Last Resort (BOLR) policy following a six-month review.
The parties had withheld the requested interview notes, claiming that they were subject to legal professional privilege, which ASIC subsequently disputed.
However, Clayton Utz produced the documents with no claim of legal professional privilege by AMP on 7 March 2018. A day later (8 March), the proceedings were dismissed by consent, and the wealth firm agreed to pay ASIC’s costs.
ASIC deputy chair Daniel Crennan said the regulator is “pleased” that the documents have been handed over, but remains “disappointed” at the delay in doing so.
He noted that the corporate watchdog is “determined to take enforcement action against the major banks and financial service providers, and to use all legal powers necessary to investigate the significant issue of fees for no service”.
“Entities should take seriously their obligations under statutory notices issued by ASIC, including producing documents in accordance with the specified time frame and not preventing the disclosure of documents to ASIC by making inappropriate [legal professional privilege] claims,” Mr Crennan continued.
“These interruptions delay and frustrate ASIC’s proper investigation.”
The regulator already indicated that it would place greater focus on “court-based outcomes to provide strong public denunciation and punishment of wrongdoing” this year, after commissioner Kenneth Hayne concluded that “the law was too often not enforced at all, or not enforced effectively”, with ASIC having “rarely” taken wrongdoers to court. As such, one of his final recommendations was that when ASIC is considering any legal violation, it should ask the critical question: “Why not litigate?”
Reviews into fees-for-no-service breaches ‘unreasonably delayed’
The corporate regulator has also announced delays in AMP, ANZ, Commonwealth Bank, Macquarie, NAB and Westpac conducting “further reviews” to “identify systemic [fees-for-no-service] failures beyond those already identified and reported to ASIC since 2013”.
ASIC commissioner Danielle Press said the reviews have been “unreasonably delayed” due to the banks’ failure to “sufficiently prioritise and resource” the reviews.
“ASIC acknowledges that they are large-scale reviews – they relate to systemic failures over long periods with reviews going back six to 10 years and cover 36 licensees from the six institutions that currently authorise more than 7,000 advisers,” she continued.
“However, we believe the institutions have failed to sufficiently prioritise and resource their reviews, particularly as ASIC advised them to commence the reviews in mid-2015 or early 2016.”
The delays were attributed to:
- “poor record-keeping and systems within the institutions, which mean that in many cases they have been unable to access customer files for review”;
- “failure by some institutions to propose reasonable customer-centric methodologies to identify and compensate customers despite ASIC’s clear articulation of expectations”; and
- “some institutions have taken a legalistic approach to determination of the services they were required to provide”.
Ms Press went on to praise the government for accepting the recommendation from the 2017 ASIC Enforcement Review Taskforce report to allow the regulator to direct Australian Financial Services Licence holders to establish “suitable customer review and compensation programs”.
Thus far, the corporate watchdog said AMP, ANZ, Commonwealth Bank, NAB and Westpac have collectively paid or offered to pay around $350 million in compensation to customers who were wrongfully charged financial advice fees, as at the end of January 2019.
The banks have reportedly provisioned more than $800 million towards potential compensation for further fees-for-no-service breaches. However, ASIC noted that the reviews remain incomplete, so the total compensation figure could change.