Westpac-owned BT Funds Management and Asgard Capital hit with $3m fines

Westpac-owned BT Funds Management and Asgard Capital have been fined after they charged fees for no service and misled hundreds of clients.

Westpac-owned BT Funds Management and Asgard Capital have been fined a total of $3m after they charged fees for no service and misled hundreds of clients about the charges.

Federal Court Justice Michael Wheelahan found that the funds had made false and misleading statements to customers that no adviser fees were being deducted from their accounts following a request they no longer wanted the service.

The funds also had engaged in false or misleading representations by providing customers with account statements that failed to show fees were still being deducted.

BT Funds and Asgard Capital were each fined $1.5m for the conduct which had affected more than 400 customers during a three-year period from September 2014.

Justice Wheelahan said the fees had been deducted due to system errors that had remained undetected for two years. Westpac has indicated it will be paying the penalties and costs.

The court found that in August 2015 one customer had requested the removal of a financial adviser from their account. However, over the next year more than $1500 was charged in adviser fees.

From July 2014, part of the process for removing financial advisers from customer accounts had been outsourced to an offshore provider that could not make the necessary changes if customers requested they no longer wanted the service. Further overcharging had been caused by coding errors. BT later identified the system errors leading to the fees being charged and commenced an investigation to identify affected customers.

“Inadvertent system errors which have the capacity to cause undetected losses of the kind that occurred here are serious,” said Justice Wheelahan.

“That is particularly so when the errors went undetected for a period of over two years until one customer challenged the charging on the adviser fee.”

He said financial service providers should not be able to take the benefits that come from automated processes that contributed to profits without ensuring they worked properly.

“An appropriate penalty should have the effect of deterring the defendant and financial service providers generally from maintaining defective systems and conversely providing an incentive to establish and maintain systems that are reliable,” Justice Wheelahan said.

The court found that it took close to a year from the first notification of the overcharging for BT and Asgard to rectify the errors. “Remediation of customers was commenced some months later which included notifying affected customers,” Justice Wheelahan said.

He noted that Westpac had made a timely disclosure of the errors to the Australian Securities and Investments Commission even though the information provided had to be corrected. It also acknowledged the preparedness of BT and Asgard to make early admissions of liability and took this into account in determining the penalty.

ASIC deputy chair Sarah Court said financial service providers had an obligation to ensure their systems and processes were reliable and accurate. Both funds were ordered to publish an adverse publicity order on their websites.

A Westpac spokesperson said BT and Asgard apologise for the errors that occurred, noting that the issue was self-reported to ASIC and customers were contacted and remediated between 2017-18.

“(BT and Asgard) accepted the allegations and did not defend the proceedings,” the spokesperson said.

Originally published as Westpac-owned BT Funds Management and Asgard Capital hit with $3m fines