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18-175MR ASIC commences civil penalty proceeding against Westpac for poor financial advice
ASIC has commenced proceedings in the Federal Court of Australia against Westpac Banking Corporation in relation to alleged poor financial advice provided by one of its former financial planners, Mr Sudhir Sinha.
In Court documents filed yesterday, ASIC alleges that, in four sample client files selected by ASIC, Mr Sinha breached the 'best interests' duty under the Corporations Act ('the Act'), provided inappropriate financial advice, and failed to prioritise the interests of his clients.
Mr Sinha provided financial advice in the Perth area as an employee of Westpac from 2001 to November 2014. In June 2017, Mr Sinha was banned by ASIC from providing financial services for a period of five years as a result of his failure to meet his ongoing advice service obligations (refer 17-178MR).
ASIC contends, as Mr Sinha's responsible licensee during that period, Westpac is liable for the alleged breaches of the 'best interests' obligations by Mr Sinha under section 961K of the Act. ASIC also alleges that Westpac contravened sections 912A(1)(a) and (c) of the Act, which requires Westpac 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.
Section 961K of the Act is a civil penalty provision, and attracts a maximum penalty of $1 million per contravention.
Separately, Westpac has a significant remediation programme underway in respect of Mr Sinha’s conduct. Westpac has reported to ASIC that, as at 14 June 2018, it has paid approximately $12 million in compensation to clients impacted by Mr Sinha's poor advice and ongoing advice service failures.
The proceeding is listed for a directions hearing in Sydney on 19 July 2018 at 9:30am.
On 19 July 2018, the Court made orders setting out a timetable for the filing of pleadings. A copy of the Statement of Claim filed by ASIC in accordance with those orders can be accessed here. The matter is listed for a further Case Management Hearing in the Federal Court in Sydney on 4 September 2018.
Editor's note 2:
The date for the case management hearing on 4 September 2018 has been vacated and rescheduled to 10 October 2018 after agreement and approval on timetabling.
Editor's note 3:
On 10 October 2018, Justice Wigney has fixed the matter for final hearing on 15 and 16 April 2019 in the Federal Court in Sydney.
Editor's note 4:
The trial took place before Justice Wigney on 15 April 2019. Westpac admitted that it had contravened the Corporations Act, but the exact number of contraventions and the penalty that should be imposed were contested by the parties. Judgment has been reserved.