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21-186MR BT Funds Management and Asgard Capital Management ordered to pay a $3m penalty for charging fees for no service and making misleading statements
The Federal Court has imposed civil penalties totalling $3 million against BT Funds Management Limited (BT) ($1.5m) and Asgard Capital Management Limited (Asgard)($1.5m) for charging fees for no service and making misleading statements.
BT and Asgard were also ordered to publish an Adverse Publicity Order on their websites.
The Court found that between September 2014 and August 2017, a total of 404 customers were harmed by BT’s and Asgard’s conduct. The Court held that on at least 487 occasions, BT and Asgard had contravened ss 12DA(1) and 12DB(1)(g) of the ASIC Act, and s 1041H of the Corporations Act, by:
- making false or misleading representations to customers in customer account statements that no deductions of ongoing adviser fees were being made from customers’ accounts after those customers requested to remove their financial advisers from their accounts; and
- engaging in misleading or deceptive conduct by providing customers with account statements which did not show that BT and Asgard were continuing to deduct an ongoing adviser fee from customers’ accounts after those customers requested to remove their financial advisers from their accounts.
The Court also found Asgard had breached its obligation to do all things necessary to ensure the financial services covered by its financial services licence were provided efficiently, honestly and fairly, and contravened s912A of the Corporations Act.
‘Misleading statements were made to customers, who were also charged for services they did not receive. The licensed financial services industry has an obligation to ensure that their systems and processes are reliable, accurate and their customers must be able to have trust in them’ said ASIC Deputy Chair Sarah Court.
In his decision, Justice Wheelahan observed that ‘Financial services providers in the position of the defendants should not be able to take the benefits which arise from automated and offshore processes and systems, which it may be inferred contribute to substantial profits, without also undertaking the burden of ensuring that those systems work, and that they promptly identify occasions where they do not.
‘An appropriate penalty should have the effect of deterring the defendants, and financial services providers generally, from maintaining defective systems, and conversely, providing an incentive to establish and maintain systems that are reliable.’
The court acknowledged the preparedness of BT and Asgard to make early admissions of liability and took this into account in determining penalty. Westpac has indicated that it will be paying the penalties and the costs awarded against BT and Asgard.
BT is the trustee and Registrable Superannuation Entity licensee for:
- Asgard Infinity eWRAP Pension Account;
- Asgard Infinity eWRAP Super Account;
- Asgard Rollover Service;
- Asgard Superannuation Account; and
- Asgard Employee Superannuation Account (Super Funds).
Asgard is the custodian and administrator for the Super Funds, as well as the issuer and administrator for the Asgard Infinity eWRAP Investment Account (IDPS product).
BT and Asgard’s conduct were the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry – see Volume 2 (part 13) of the Final Report.
The Royal Commission found that between 2001 and August 2017, BT and Asgard charged around 767 members fees for financial product advice that was not provided. Between December 2017 and March 2018, Westpac remediated $634,490 to the members.
ASIC commenced civil penalty proceedings against BT and Asgard on 20 August 2020 (20-190MR).
ASIC has been monitoring remediation for fees for no service and other failures by financial services institutions, including Westpac (21-023MR).