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Tuesday 11 February 2020

20-028MR ASIC update on compensation for financial advice related misconduct

Six of Australia's largest banking and financial services institutions paid or offered a total of $749.7 million in compensation, as at 31 December 2019, to customers who suffered loss or detriment because of non-compliant advice or fees for no service (FFNS) misconduct.

AMP, ANZ, CBA, Macquarie, NAB and Westpac (the institutions) undertook the review and remediation programs to compensate affected customers [i] as a result of two major ASIC reviews. ASIC commenced the reviews in 2015 to look into:

  • how effectively the institutions supervised their financial advisers to identify and deal with non-compliant advice. See Report 515 Financial advice: Review of how large institutions oversee their advisers (REP 515);and
  • the extent of failure by the institutions to deliver ongoing advice services to financial advice customers who were paying fees to receive those services. See Report 499 Financial advice: Fees for no service (REP 499).

The table [ii] below provides a breakdown of the compensation payments made or offered by the institution as at 31 December 2019.

Institution

Non-compliant advice [iii]

FFNS misconduct

  Compensation paid No. of customers paid compensation Compensation paid or offered No. of customers paid or offered compensation
AMP $26,654,023 1,987 $140,459,870 193,167
ANZ $36,205,259 1,777 $59,415,383 21,184
CBA $9,386,454 628 $164,846,374 50,576
Macquarie Not applicable Not applicable $2,583,645 734
NAB $39,944,208 1,294 $163,862,768 586,961
Westpac $29,680,142 1,365 $76,686,356 19,441
Total $141,870,086 7,051 $607,854,395 872,063

Background

REP 515

ASIC released REP 515 in March 2017 outlining findings from its review of:

  • how AMP, ANZ, CBA, NAB and Westpac identified and dealt with non-compliant advice by their advisers between 1 January 2009 and 30 June 2015; and
  • the development and implementation by these institutions of a framework for the large-scale review and remediation of customers who received non-compliant advice in the same period.

Since the publication of this report, ASIC has been monitoring the ongoing implementation of the institutions’ customer review and remediation programs.

REP 499

ASIC released REP 499 in October 2016 describing systemic failures of the advice divisions of AMP, ANZ, CBA, Macquarie, NAB and Westpac as well as some of their product issuers. These included the failure to ensure provision of ongoing advice services to customers who paid fees to receive those services, the failure of advisers to provide those services, and the failure of product issuers to switch off advice fees of customers who did not have a financial adviser.

Notes:

[i] The institutions do not all hold data for the number of individuals remediated. The term ‘customers’ broadly refers to individuals, couples or in the case of a self-managed superannuation fund, all trustees of the fund.

[ii] The data in this table has been compiled by ASIC from information received from AMP, ANZ, CBA, NAB, Macquarie and Westpac.

[iii] For non-compliant advice:

Macquarie: Macquarie has not been included in this review because ASIC accepted an enforceable undertaking (EU) in January 2013 from Macquarie Equities Limited (MEL), a subsidiary of Macquarie Group. The effect of the EU was for MEL to undertake work that was largely consistent with the aims of ASIC’s review. Under the consequential remediation program, as at June 2017, MEL paid approximately $24.7 million in compensation to 263 clients (Refer 17-177MR).

IOOF: In October 2018, IOOF Holdings Limited (IOOF) took ownership of ANZ’s Aligned Dealer Groups (ADGs) comprising Millennium3 Financial Services, RI Advice and Financial Services Partners. IOOF will continue customer review and remediation for non-compliant advice in relation to the ADGs using the same independently assured framework implemented by ANZ.

Last updated: 20/02/2020 03:32