June 15, 2018
ASIC has begun court proceedings against Westpac, alleging that one of its former financial advisers breached best interest duties and provided inappropriate advice.
The proceedings, which will take place in the Federal Court of Australia, concern former adviser Sudhir Sinha, who was dismissed by Westpac in late 2014 and then subsequently banned for five years by ASIC in mid-2017 (see: ASIC Bans Westpac Adviser, Cancels Insurance Licence).
Court documents filed by the regulator have alleged that, in four sample client files selected by ASIC, Sinha breached the ‘best interests’ duty under the Corporations Act, provided inappropriate financial advice, and failed to prioritise the interests of his clients.
Sinha, who was based in the Perth area, was an employee of Westpac from 2001 to November 2014, and ASIC will argue that as his responsible licensee during that period Westpac is liable for the alleged breaches of the ‘best interests’ obligations by Sinha.
ASIC has also alleged that Westpac breached the sections of the Corporations Act which require it to do all things necessary to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly, and to comply with financial services laws.
In response to ASIC proceedings, Westpac stated it is reviewing the documents lodged by the regulator with the court and “…will continue to co-operate with ASIC and seek to resolve the proceedings as quickly as possible.”
The bank highlighted that it had identified compliance concerns with Sinha through inhouse surveillance and following an internal investigation suspended him in September 2014, and dismissed Sinha in November 2014 and reported the matter to ASIC in 2015.
Westpac also stated it had “…also proactively initiated remediation to identify and compensate affected customers and has completed remediation activities”.
In its statement, ASIC noted that, as at 14 June 2018, Westpac had paid approximately $12 million in compensation to clients impacted by Sinha’s poor advice and ongoing advice service failures.
The proceeding has been listed for a directions hearing in Sydney on 19 July 2018.