Financial Services Royal Commission: Summary of ASIC enforcement action

Introduction

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (Royal Commission) was established in December 2017.

The Interim Report was published in September 2018, and the Final Report was published in February 2019. Commissioner the Honourable Kenneth Hayne AC QC made 13 referrals to ASIC for investigation. In addition to these referrals, the Royal Commission examined additional case studies, 32 of which also led to ASIC investigation.

ASIC’s investigations reinforce that financial services institutions must:

  • Always put their customers first
  • Fulfil any promises made to their customers
  • Ensure all consumers are treated fairly
  • Ensure that they do not take advantage of vulnerable consumers
  • Put in place the correct and legal compliance processes to monitor their activities, and
  • Maintain the appropriate governance, oversight, and systems over those compliance processes.

ASIC’s work throughout this broad slate of matters reinforces our commitment to investigate where there are failures in the activities of our regulated entities. Based on what our investigations show, ASIC will continue to seek court outcomes including civil penalties and criminal prosecutions.

This page summarises the outcomes of the ASIC investigations of the Royal Commission matters as at 9 December 2021 when the last civil proceeding resulting from these matters was filed.

Referrals made to ASIC for investigation by the Royal Commission

Number

Total referrals

13

  • Civil cases filed from referrals

6

  • Criminal cases prosecuted by the Commonwealth Director of Public Prosecutions from referrals

2

  • Referrals investigated that concluded with no further action

5

Number of matters completed

5

Combined total of civil penalties so far

$79M

Number of matters still before the Federal Court or under prosecution by the Commonwealth Director of Public Prosecutions

3

 

Case studies investigated by ASIC following the Royal Commission

Number

Total case studies investigated

32

  • Civil cases filed from case studies

12

  • Criminal cases prosecuted by the Commonwealth Director of Public Prosecutions from case studies

4

  • Criminal brief referred to the Commonwealth Director of Public Prosecutions from case studies

1

  • Case studies investigated that concluded with no further action

15

Number of matters completed

9

Combined total of civil penalties so far

$31.59M

Number of matters still before the Federal Court or under prosecution by the Commonwealth Director of Public Prosecutions

7

Since 2019, ASIC has published regular updates on our actions to implement Royal Commission recommendations and reforms in our Annual Reports. ASIC has also published half-yearly Enforcement Updates that report on our major enforcement milestones. 

Fees for No Service cases

Fees for no service, a key focus of the Royal Commission, is a systemic issue that resulted in significant financial loss for consumers and billions of dollars in remediation by the institutions involved. ASIC issued a media release in 2015 noting multiple investigations against the failure by six of Australia’s largest financial institutions to deliver ongoing financial advice services to customers despite charging fees for them.

ASIC had investigated and commenced our first case against the NAB superannuation companies before the Royal Commission handed down its Final Report.

Matter

Action against

Summary

Status

Outcomes

1

NAB superannuation companies: NULIS Nominees (Australia) Limited and MLC Nominees Pty Ltd
(
18-259MR)

ASIC alleged that two entities in NAB’s wealth management division, NULIS and MLC Nominees, had made false and misleading representations to superannuation members about their entitlement to charge plan service fees and members’ obligations to pay the fees.

ASIC also alleged that MLC Nominees and NULIS failed to ensure that their financial services were provided efficiently, honestly, and fairly.

Completed

20-211MR NAB superannuation trustee companies to pay $57.5 million penalty for fees for no service breaches

 

2

Aware Financial Services Australia Limited (previously known as State Super Financial Services Australia Limited)
(
20-189MR)

ASIC has commenced civil penalty proceedings in the Federal Court against Aware for charging at least 36,592 members fees for financial advice that Aware promised it would provide but did not provide.

Litigating

This matter is still before the Federal Court.

 

3

BT Funds Management and Asgard Capital Management (part of the Westpac Group)
(
20-190MR)

ASIC alleged that Asgard Capital Management Limited charged adviser fees to 404 customers for financial advice that was not provided and also that Asgard and BT Funds Management Limited made misleading representations in half-yearly or annual account statements regarding the charging of the adviser fees.

Completed

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

4

Avanteos Investments Limited (formerly a subsidiary of CBA)
(
21-337MR)

Avanteos has pleaded guilty to 18 criminal charges relating to failures to update defective disclosure statements and continuing to charge fees to deceased superannuation members.

At the time of the offending, Avanteos was a subsidiary of the Commonwealth Bank of Australia.

As a result of the offending, 499 deceased members with funds in these superannuation products were charged almost $700,000 in fees by Avanteos when it was not entitled to do so. Avanteos has remediated all affected customers.

Litigating

This matter is under prosecution.

Additionally, ASIC finalised an investigation into the alleged fees-for-no-service conduct by AMP Financial Planning Pty Limited arising from its Buyer of Last Resort Policy. This conduct was also the subject of inquiry and evidence at the Financial Services Royal Commission (21-173MR).

Poor financial advice cases

The law imposes important obligations on financial advisers and advice licensees to protect the interests of consumers, including that the advice they receive meets their needs and objectives and is provided by advisers acting in their best interests. However, the Royal Commission highlighted examples of serious non-compliance by advisers, which resulted in poor outcomes for consumers.

ASIC had investigated and commenced our first case against Dover Financial Advisers and Mr McMaster before the Royal Commission handed down its Final Report.

Matter

Action against

Summary

Status

Outcomes

1

Dover Financial Advisers and its sole director Terry McMaster
(
18-269MR)

ASIC alleged that Dover misled and deceived clients from September 2015, when they commenced using their 'Client Protection Policy' (Protection Policy), to March 2018 when Dover withdrew the Protection Policy in response to ASIC’s concerns

ASIC further alleged that Mr McMaster was knowingly concerned in that misconduct, as he was Dover’s sole director, the Key Person named on Dover’s Australian financial services licence and a responsible manager during the relevant period.

Completed

21-040MR Dover Financial Advisers to pay $1.2 million penalty and its sole director to pay $240,000 penalty for false or misleading conduct

 

2

RI Advice Group Pty Ltd and a former financial adviser, John Doyle (RI Advice was previously an ANZ financial advice business)
(
19-297MR)

ASIC alleged that RI Advice failed to take reasonable steps to ensure that Mr Doyle provided appropriate advice, acted in clients’ best interests, and put his clients’ interests ahead of his own, as required by law. Mr Doyle was an authorised representative of RI Advice between May 2013 and June 2016.

ASIC also took action against Mr Doyle, alleging that he gave inappropriate “cookie cutter” advice to retail clients to invest in complex structured financial products without taking into account their financial goals or risk tolerance.

The impacted clients were, in some cases, preparing for retirement.  ASIC alleges that Mr Doyle received upfront and ongoing commissions for each of his clients’ investments in the structured products.

ASIC alleged RI Advice knew, or should have known, that there was substantial risk Mr Doyle was not complying with his obligations under the law and was repeatedly recommending structured products to his clients, bypassing compliance processes. ASIC further alleged RI Advice did not take reasonable steps in response.

Penalty Judgment Is Reserved

21-196MR Court finds RI Advice liable for failing to supervise financial adviser following ASIC investigation

3

Former financial adviser and Royal Commission witness, Sam Henderson
(
20-130MR)

Following an ASIC investigation, former Sydney financial adviser Sam Maxwell Henderson was criminally charged with three counts of dishonest conduct and two counts of giving a disclosure document knowing it to be defective. The charges related to alleged false representations made by Mr Henderson that he had a Master of Commerce.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions following a referral from ASIC.

Sentenced

20-249MR Royal Commission witness and former financial adviser Sam Henderson sentenced

4

Former financial adviser, Ahmed Saad
(
21-032MR)

Mr Ahmed Saad, of Glenroy, Victoria, was criminally charged with dishonestly obtaining a financial advantage by deception for another and a further charge of attempting to obtain a financial advantage by deception for another.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions following a referral from ASIC.

Sentenced

21-314MR Former Victorian financial adviser sentenced to jail for obtaining financial advantage by deception

Addressing harm in insurance

ASIC took action in cases where relevant practices within the insurance industry were delivering poor outcomes for consumers. ASIC has also addressed conduct where we saw customers not being treated fairly in claims handling.  The community expects their insurer to be there when something does go wrong, to be treated fairly and with dignity and respect.

 

Matter

Action against

Summary

Status

Outcomes

1

Select AFSL Pty Ltd, BlueInc Services Pty Ltd, Insurance Marketing Services Pty Ltd and director Russell Howden
(
19-244MR)

ASIC alleged that Select, BlueInc, Insurance Marketing Services and director Russell Howden breached the law during telephone sales of life and accidental injury insurance issued by St Andrew’s Life Insurance Pty Ltd under the brand names ‘Let’s Insure’ and ‘FlexiSure’ between 1 February 2015 to 19 March 2018.

The allegations include:

  • unconscionable conduct when selling insurance and/or taking payment details over the phone, and when consumers attempted to cancel their insurance policies;
  • undue harassment;
  • coercion; and/or
  • making false and/or misleading representations.

Judgment Is Reserved

This matter is still before the Federal Court.

2

TAL Life Limited
(
19-357MR)

ASIC alleged that TAL Life breached the ASIC Act, the Corporations Act, and the Insurance Contracts Act, when handling a claim made under an income protection policy.

The consumer (whose identity was the subject of a non-publication order during the Financial Services Royal Commission) first made a claim under her income protection policy in January 2014 after she was diagnosed with a medical condition. After obtaining the consumer’s medical history, TAL sent a letter confirming that her policy would be avoided on the basis that she had failed to disclose some unrelated prior medical history. In that letter, TAL asserted that she had breached her duty of good faith under s13 of the Insurance Contracts Act.

Completed

21-042MR Court finds that TAL Life Limited breached its duty of utmost good faith – Royal Commission referral

3

Youi Pty Ltd
(
20-091MR)

ASIC alleged that Youi breached the Insurance Contracts Act, in relation to Youi’s duty of utmost good faith in handling a building and contents insurance claim made by a policyholder.

The policyholder first made an insurance claim in January 2017 following a severe hailstorm in their hometown of Broken Hill in November 2016.

ASIC alleged that Youi failed to meet the standard imposed by the duty in handling the claim as it took nearly two years to settle, with the repairs to the home finally being completed in November 2018.

Completed

20-302MR Youi breached duty of utmost good faith – Royal Commission case study

4

Allianz Australia Insurance Ltd and AWP Australia Pty Ltd (20-227MR)

ASIC alleged that Allianz and its related-party AWP sold travel insurance in a misleading and deceptive manner, while sold through three websites run by Expedia Inc.

Completed

21-234MR Allianz Australia Insurance and AWP Australia ordered to pay penalties of $1.5 million for misleading sale of travel insurance on Expedia websites

5

ACBF Funeral Plans and Youpla Group
(
20-262MR)

ASIC alleges that between 1 January 2015 and 30 November 2018:

  • ACBF Funeral Plans engaged in misleading and deceptive conduct and made false and misleading representations, in offering, promoting, and selling a funeral expenses insurance policy; and
  • Youpla Group was knowingly concerned in, or party to, the contravening conduct.

ASIC claims that implied representations made by ACBF in marketing material and point of sale documentation were false.

Litigating

This matter is still before the Federal Court.

6

Allianz Australia Insurance Ltd and AWP Australia Pty Ltd (21-029MR)

Allianz has been charged with seven counts, and AWP with one count, of making false or misleading statements regarding the sale of Allianz domestic and international travel insurance products.

ASIC alleges that between 2016 and 2018, Allianz and AWP published information online, including on Allianz’s domestic, basic, and comprehensive travel insurance web pages, that misrepresented the characteristics or level of coverage of travel insurance on sale to consumers.

This matter is being prosecuted by the Commonwealth Director of Public Prosecutions following a referral from ASIC.

Litigating

This matter is still under prosecution.

7

Commonwealth Bank of Australia (21-251MR)

Criminal charges have been filed against CBA in the Federal Court for the mis-selling of consumer credit insurance.

The 30 criminal charges relate to CBA’s promotion and sale of CreditCard Plus and Loan Protection policies as an add-on insurance product in branches, by telephone and online. The charges relate to allegations that between 2011 and 2015, CBA made false or misleading representations to customers that the insurance policies had uses or benefits to those customers when part or all the benefits were not available.

The matter is being prosecuted by the Commonwealth Director of Public Prosecutions after an investigation and referral by ASIC.

Sentencing Judgment is Reserved.

21-286MR CBA pleads guilty to criminal charges for mis-selling consumer credit insurance

8

Former Freedom Insurance director Keith Cohen and consultant Robert Oayda
(
21-279MR)

ASIC has commenced civil penalty proceedings in the Federal Court against two individuals in relation to sales incentive programs offered by Freedom Insurance Pty Ltd (in liquidation).

The proceedings allege Mr Cohen, the former Managing Director of Freedom, and Mr Oayda, a former Quality Control manager, were involved in breaches of conflicted remuneration and other laws.

ASIC alleges that both Mr Cohen and Mr Oayda were involved in decisions that saw sales agents qualify for overseas holidays if they reached certain sales targets and a Vespa scooter if they made the most sales. ASIC is concerned that these incentives influenced the sales agents’ conduct and made driving the sale their focus, rather than customer needs.

Litigating

This matter is still before the Federal Court.

Misconduct in credit and banking

One of the key objectives of the National Credit Act and its licensing regime is consumer protection, and this is a key priority for ASIC when enforcing national consumer credit laws. The conduct that was the subject of ASIC action, ranged from individual bankers involved in submitting false applications for loans, dealing with and remunerating unlicenced people in loan applications and extending credit to a customer who was known to have gambling - related debts.

Matter

Action against

Summary

Status

Outcomes

1

Former National Australia Bank branch manager, Mathew Alwan,
(
19-216MR)

On 20 August 2019, former NAB branch manager, Mathew Alwan, pleaded guilty in the Local Court of NSW to one count of ‘intention to defraud by false or misleading statement’, an offence under the NSW Crimes Act.

An ASIC investigation found that between 23 October 2013 and 19 September 2015, Mr Alwan dishonestly made false and misleading statements to NAB in relation to 24 home loan applications.

This investigation began and led to permanent bannings before the Royal Commission Final Report was handed down.

Completed

19-315MR Former NAB branch manager sentenced for making false and misleading statements to NAB

2

National Australia Bank
(
19-222MR)

ASIC brought this proceeding against NAB for misconduct arising out of failures with NAB’s Introducer Program.

ASIC alleged that between 3 September 2013 and 29 July 2016, NAB accepted information and documents in support of consumer loan applications from third party introducers who were not licensed to engage in credit activity.

As a result, ASIC alleges NAB breached the prohibition against conducting business with parties engaging in credit activity without an Australian credit licence. ASIC also alleged that NAB breached its obligations requiring it to engage in credit activities efficiently, honestly, and fairly and to comply with the law.

Completed

20-247MR NAB ordered to pay $15 million for dealing with unlicensed home loan Introducers: Royal Commission case study

3

Commonwealth Bank of Australia
(
20-064MR)

ASIC alleged that CBA failed to take account of a notification by a customer (Mr Harris) that he was a problem gambler and further failed to take reasonable steps to verify his financial situation before offering and approving a credit card limit increase.

Completed

20-263MR CBA ordered to pay $150,000 for credit limit increase provided to problem gambler: Royal Commission case study

 

System and process failures causing financial harm to customers

Financial services licenced entities have an obligation to implement, maintain and continue to invest in appropriate systems, governance, and put controls in place to ensure they deliver on promises made to their customers. A number of proceedings were issued for long standing and undetected failures in systems which caused significant financial loss to consumers.

Matter

Action against

Summary

Status

Outcomes

1

Commonwealth Bank of Australia
(
20-063MR)

ASIC alleged that CBA harmed customers by not providing certain benefits to customers and, as a result, customers were overcharged fees and interest on loans and fees, and underpaid interest on savings. ASIC also alleged that CBA also overcharged fees to certain customers.

These harms derived from failures with their AgriAdvantage Plus Package.

From May 2005 to December 2015, CBA sold customers the AgriAdvantage Plus Package, which entitled customers, in exchange for the payment of package fees, to benefits in the form of fee waivers and interest rate discounts, and bonus interest on savings, on 22 CBA products.

ASIC alleged that the causes of CBA's failures included the highly manual nature of CBA's systems by which the AgriAdvantage Plus Package benefits were applied, as well as, CBA having no systems or processes in place to check whether customers were receiving benefits.

Completed

20-129MR CBA to pay $5 million over the AgriAdvantage Plus Package – Royal Commission case study

2

Commonwealth Bank of Australia
(
20-305MR)

ASIC alleged that CBA charged a rate of interest on business overdraft accounts substantially higher than what its customers were advised. The total overcharged interest exceeded $2.9 million.

ASIC alleged that CBA attempted to manually fix the overcharging error after a complaint was made to the bank in 2013. The manual fixes were unsuccessful, and customers continued to be overcharged. ASIC alleges that from 1 December 2014 to 31 March 2018, being within the six-year limitation period, CBA engaged in conduct that contravened financial services laws.

Completed

21-065MR CBA to pay $7 million court penalty for overcharged interest – Royal Commission case study

3

Australia and New Zealand Banking Group Ltd
(21-340MR)

ASIC alleged that ANZ misled customers and failed to provide benefits promised to customers who held offset transaction accounts or a ‘Breakfree’ package.

ASIC alleges that between the mid-1990s and September 2021, ANZ failed to provide certain benefits, outlined in their terms and conditions, to approximately 580,447 customers which has resulted in ANZ having to remediate nearly $200 million to impacted customers.

Litigating

This matter is still before the Federal Court.

 

Superannuation

Superannuation is important for the future financial security of Australians, and ASIC seeks to ensure that regulated superannuation funds operate in a way that is fair for members and promotes confidence in superannuation generally.

Following the Royal Commission, ASIC’s role has expanded to include the regulation of superannuation trustee conduct. To that end, ASIC is committed to ensuring trustees deliver on their commitments to members and treat them fairly, including the obligation to ensure that members are provided the correct information to allow them to make informed decisions about their retirement savings. ASIC aims to deter any future misconduct and prevent consumer harm by taking appropriate action against wrongdoing.

Matter

Action against

Summary

Status

Outcomes

1

Colonial First State Investments Limited its own capacity, and as the trustee for the Colonial First State FirstChoice Superannuation Trust
(
20-065MR)

ASIC alleged that, between March 2014 and August 2016, Colonial First State communicated with members of the FirstChoice Fund in a misleading or deceptive manner regarding the provision of investment directions to stay within the FirstChoice Fund rather than transitioning to Colonial First State’s MySuper product.

ASIC's case focused on template letters sent to members, as well as 46 telephone calls made in accordance with scripts. ASIC also alleges that Colonial First State failed to provide a "general advice warning" during the telephone calls.

Completed

21-276MR Colonial First State to pay $20 million penalty for misleading superannuation members

2

Commonwealth Bank of Australia and its subsidiary, Colonial First State Investments Limited
(
20-143MR)

ASIC alleges that more than $22 million in conflicted remuneration was paid by CFSIL to CBA for the distribution of Essential Super, a superannuation product issued by CFSIL. CBA distributed the Essential Super product using its branch and digital channels. Approximately 390,000 individuals became members of the Commonwealth Essential Super fund under the arrangements.

Litigating

This matter is still before the Federal Court.

 

Last updated: 09/12/2021 08:15