ASIC has taken action in the Federal Court against AMP Financial Planning for alleged failures to ensure advisers complied with the best interests duty.
In a statement, ASIC alleged that a number of AMP Financial Planning’s (AMP FP) advisers had engaged in ‘rewriting conduct’, where clients were given “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”.
These advisers “stood to receive higher commissions” through this method than through a transfer, and left clients unnecessarily exposed 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,” the regulator said.
“ASIC contends that by 1 July 2013, AMP FP 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 AMP FP failed to take reasonable steps to deal with the conduct in contravention of section 961L of the Act.”
According to the statement, ASIC will “rely upon a number of sample client files” in which the regulator alleges this type of misconduct 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,” ASIC said.
“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.”
Contraventions of Section 961L of the Corporations Act can result in penalties of up to $1 million for each instance.
The regulator also noted it is continuing 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.”
The proceeding is listed for a directions hearing on 27 July 2018, according to the statement.
AMP to file defence "in due course"
In a statement, AMP acknowledged the proceedings brought against it by the corporate regulator and said they "ha[ve] been co-operating with an ASIC investigation of the matter" which had begun in 2014.
"AMP will carefully consider ASIC’s pleadings and file its defence in due course. In the meantime, we will work with ASIC to agree a timetable for the progress of the proceedings," the statement said.
The firm also noted that AMP's pleadings identified Mr Panganiban in particular.
"AMP is apologising to the customers impacted by Mr Panganiban’s actions and they are currently being compensated.
"We have continued to enhance our monitoring and supervision activities to monitor the writing of new insurance policies," the statement said.