Five companies that are or were part of the AMP Limited group (together ‘AMP’) have been ordered by the Federal Court to pay a total $14.5 million in penalties for charging fees for services that were not provided to 1,452 superannuation members.
These members had been paying fees in return for access to general financial advice as part of an agreement between their employer and AMP. On leaving their employer, the members continued to be automatically charged the advice fee, despite no longer having access to the advice services for which they were being charged.
ASIC Deputy Chair Sarah Court said, ‘AMP was aware it was charging fees for no service to these members but did not take the proper steps to prevent it from continuing. AMP admitted liability regarding these failures and admitted it did not have the proper systems and compliance arrangements in place to ensure the payments ceased when members left their employer.
‘Superannuation trustees should treat the penalty imposed today as an important reminder to maintain robust internal governance and assurance arrangements. Trustees are responsible for ensuring they only deduct fees from member accounts for services actually provided. If they fail in this obligation, they could face significant penalties,’ concluded Ms Court.
The Court found between July 2015 and September 2018, AMP deducted $356,188 in fees even though it was aware the member had ceased their employment and could no longer access the advice services. Although AMP has remediated $691,032 to affected customers, the Court found AMP failed to investigate whether or not there was a systemic issue, despite many complaints over a lengthy period of time.
By charging fees for no service and failing to have internal procedures and controls in place to prevent this kind of misconduct, the Court found that AMP also breached its obligations as an Australian financial services licence holder to act efficiently, honestly and fairly and to comply with financial services laws.
The five AMP companies are:
- AMP Superannuation Limited;
- AMP Financial Planning Proprietary Limited;
- Charter Financial Planning Limited;
- Hillross Financial Services Limited; and
- AMP Life Limited (now part of the Resolution Life Group, but was part of AMP when the misconduct occurred).
In handing down his decision, Justice Moshinsky concluded that AMP’s conduct was extremely serious and systemic, leading to contraventions that occurred repeatedly over an extended period of time. Justice Moshinsky commented, ‘In relation to “corporate culture”, I consider that the failure to investigate whether or not there was a systemic issue, despite many complaints, over a lengthy period of time, reflects very poorly on the defendants (in particular, AMP Life).
It is surprising and concerning that repeated complaints that the PSF had been wrongly debited from the superannuation accounts of members who had ceased employment with their employer-sponsor did not lead anyone within the defendants (in particular, within AMP Life) to question whether there was a systemic issue.
While it is not suggested that senior management were involved in the contraventions, in my opinion it reflects very poorly on the organisational culture that this type of questioning did not occur.’
The Court also ordered that AMP publish an adverse publicity notice on its websites for one year.
The AMP companies admitted the allegations. Throughout 2019, AMP conducted a remediation program covering all affected superannuation accounts in which more than $900,000 was repaid to affected members for wrongfully charging advice fees to over 2,500 superannuation accounts.
AMP Superannuation Limited is the trustee of two superannuation funds: the AMP Superannuation Savings Trust and the AMP Retirement Trust.
This action was brought after ASIC commenced proceedings against five AMP companies alleging that they had charged life insurance premiums and advice fees to more than 2,000 members despite being notified of their death (21-115MR).
In 2019, ASIC and APRA communicated to superannuation trustees the importance of having in place strong governance, risk management and oversight processes to ensure that only authorised and appropriate fees and other charges are deducted from members' superannuation accounts. On 30 June 2021, both regulators provided additional information to improve trustee oversight of advice fee deductions from member accounts,
ASIC has taken a number of court actions and acted to ensure remediation for consumers arising out of fees for no service conduct, which, as at 30 June 2022, had seen some of Australia’s largest banking and financial services institutions pay, or offer to pay, $3.3 billion in compensation. AMP had paid or offered close to $627 million to 331,944 consumers as of that date (22-231MR).