April 30, 2018
AMP, and the four major banks may all face criminal charges for breaches of the Corporations Act related to their financial advice businesses, the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry has been told.
As part of the closing remarks at the end of two weeks of hearings related to financial advice, Senior Counsel Assisting the Commission, Rowena Orr QC outlined a number of areas of concern for each of the institutions based on case studies presented to the Commission between 16 and 27 April.
Orr told the Commission that AMP may have breached the Act at least five times in regards to charging fees for advice which was not provided.
She added that evidence from AMP Head of Advice and New Zealand, Jack Regan “…demonstrated that senior management and employees of AMP advice licensees were aware that the conduct was a breach of their financial services licences but continued to engage in the conduct”.
Additionally, AMP may face charges in relation to misleading ASIC over the number of breaches that took place in relation to fees for no service and that an independent report produced by Clayton Utz in regards to the matter may have been changed at the request of AMP and its Board.
The Commonwealth Bank was also cited for failures among two of its advice businesses to provide financial advice to clients who had paid for it, including clients who no longer had an adviser assigned to them.
The two advice businesses – Commonwealth Financial Planning and BW Financial Advice – were recently subject to an enforceable undertaking with ASIC over the matter (see: ASIC Accepts EU from CBA Advice Businesses Over Fees For No Service).
Orr said the breaches of the Act related to failures to ensure financial services were provided efficiently, honestly and fairly, and to report as soon as practicable any breach or likely breach of the Corporations Act, which did not occur despite the Commonwealth Financial Planning being aware of the breach 18 months before it was reported.
The Commission was also told that Westpac may have breached the best interest obligations of the Corporations Act, as well as provisions to provide advice that was appropriate to clients, and providing advice that complied with financial services laws.
“On the evidence, it’s open to the Commissioner to find that Westpac’s misconduct in connection with the provision of inappropriate advice by financial advisers can be attributed, at least in part, to Westpac’s remuneration practices,” Orr said
“Westpac had a system of remuneration for employed financial advisers that incentivised revenue generation and created a risk that customers would not be provided with financial advice that was in their best interests,” she added.
ANZ and NAB
Orr also put it to the Commission that ANZ may have breached its obligations to act in the best interests of clients, to provide advice that was appropriate to clients and to provide a Statement of Advice to clients in relation to a number of advisers operating under the licences of RI Advice Group and Millenium3.
NAB was also alleged to have breached the Corporations Act after the Commission was told that binding nominations for superannuation were often signed without a second witness.
The Commission heard the practice was so widespread that 2502 clients were affected by the invalid binding nomination witnessing which was undertaken by 204 advisers and that NAB failed to report the behaviour within the appropriate timeframes required under the Corporations Act.
As such, NAB may have breached the Act by failing to ensure financial services were provided efficiently, honestly and fairly, and to ensure that its representatives complied with the financial services laws.