ASIC has commenced proceedings in the Federal Court today against AMP Financial Planning in relation to alleged failure by AMPFP to ensure its authorised financial planners comply with the best interests duty and related obligations under the Corporations Act.
ASIC alleges that certain AMPFP financial planners engaged in ‘rewriting conduct’ – which is providing advice that results in the cancellation of the client’s existing life, TPD, trauma and/or income protection insurance policies and the taking out of similar replacement policies by way of a new application rather than by way of a transfer.
By advising clients to submit new applications, the financial planners stood to receive higher commissions than they would have received under a transfer, whilst at the same time exposing the clients unnecessarily to underwriting and associated risks. ASIC alleges that this type of advice was inappropriate, and that the financial planners failed to act in the best interests of the clients and to prioritise the interests of the clients.
ASIC contends that by 1 July 2013, AMPFP knew or ought to have known that its authorised financial planners were (or there was a risk that they were) engaging in rewriting conduct and the detriment this conduct caused to the clients, yet in the period from 1 July 2013 to 30 June 2015 AMPFP failed to take reasonable steps to deal with the conduct in contravention of section 961L of the Act.
In support of this allegation, ASIC will rely upon a number of sample client files in which ASIC alleges rewriting conduct occurred. The sample files involve current and former AMPFP authorised financial planners including, among others, Rommel Panganiban, who was permanently banned by ASIC from providing financial services in September 2016, with that decision affirmed on appeal by the Administrative Appeals Tribunal last year.
Section 961L of the Act is a civil penalty provision, and attracts a maximum penalty of $1 million per contravention.
ASIC will also allege that AMPFP has breached s912A(1)(a), (c) and (ca) of the Act, which require a licensee to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly; to comply with financial services laws; and to take reasonable steps to ensure that its representatives comply with the financial services laws.
The proceeding is listed for a directions hearing in Sydney on 27 July 2018.
A copy of the Originating Process and Concise Statement filed by ASIC can be downloaded here.
ASIC continues to separately investigate AMP in relation to fees for no service conduct and in relation to the making of false and misleading statements to ASIC.
Editor's note:
The directions hearing originally scheduled for 27 July 2018 has been brought forward to 20 July 2018.
Editor's note 2:
On 20 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 13 September 2018.
Editor's note 3:
The case management hearing originally scheduled for 13 September 2018 has been vacated and is now listed for 11 October 2018.
Editor's note 4:
The matter has been listed for trial on liability issues commencing on 3
June 2019.
Editor's note 5:
On 8 April 2019, the Court made orders in relation to the preparation of a joint expert report and listed the matter for a further case management hearing on 18 April 2019 at 11am.
Editor's note 6:
On 18 April 2019, a further case management hearing was listed for 13 May 2019.
Editor's note 7:
The matter was listed for a case management hearing before Justice Lee on 21 May 2019. The Court noted AMPFP’s admission of all the contraventions of the Corporations Act as pleaded by ASIC in the Statement of Claim, and the matter has been listed for a hearing on relief (including penalty) on 19 to 21 June 2019.
Editor's note 8:
After two days of hearing on 19 and 20 June 2019, Justice Lee has adjourned the matter part heard to 26 July 2019 at 10:15am in the Federal Court in Sydney.
Editor's note 9:
On 26 July 2019, Justice Lee directed the parties to file additional material with the Court by 19 August 2019, at which time his Honour will reserve judgment.
Editor's note 10:
The matter will return to Court on 17 September 2019.
Editor's note 11:
The 17 September 2019 Court date was vacated. The matter will return to Court on 1 October 2019.
Editor's note 12:
On 1 October 2019, the hearing concluded and judgment was reserved.
Editor's note 13:
Judgment will be delivered on Wednesday 5 February at 9:30am.