AMP under investigation for possible breach of licence

The corporate regulator is investigating whether AMP breached the conditions of its financial services licence.

Craig Meller, the CEO of AMP resigned last Friday. Picture: AAP

The corporate regulator is investigating whether AMP breached the conditions of its financial services licence, which include providing services fairly, complying with financial services laws and reporting any legal breaches, with penalties including the suspension or cancellation of its licence.

Under the Corporations Act, enforced by the Australian ­Securities & Investments Commission, holders of Australian ­financial services licences (AFSL) must adhere to strict rules, including acting “honestly and fairly” and “report to ASIC any breaches” of its licence.

AMP chief executive Craig Meller resigned last Friday after AMP group executive for advice Jack Regan told the royal commission into banks the financial services giant had repeatedly misled ASIC after it ripped off more than 15,000 clients over a decade by charging them fees for services that weren’t delivered.

AMP’s wealth management arm — which needs an AFSL to legally operate — delivered the group $931 million in net cash flows last year and manages $130 billion on behalf of investors. Regarding enforcing the laws governing AFSL licence holders, ASIC deputy chair Peter Kell has said the regulator “won’t hesitate to act against licensees who do not meet these important requirements”. Those penalties include the suspension or cancellation of an AFSL.

When asked whether ASIC was investigating whether AMP had breached its AFSL licence conditions, a spokesman said the regulator was investigating the ­financial services giant under “criminal, civil and administrative laws” and that the AFSL laws were part of those administrative laws.

He said ASIC had been investigating AMP for a “considerable time”. “The investigation, which has involved the collection of thousands of documents and at least 18 examinations of AMP staff, is well advanced,” the ASIC spokesman said.

In November 2016, ASIC suspended the AFSL of small Sydney financial advice company Underwriter & Managers for three months, after it failed to file its ­annual reports for three years. No other wrongdoing was alleged.

In November last year the ­licence of small financial group ­Financial Stewards was cancelled because it had failed to respond to two “compulsory notices” ASIC had issued “as part of a surveillance”. The regulator said the group also failed to ensure services were provided “honestly and fairly” and to “recognise and report significant breaches’’.

ASIC has come under substantial criticism over claims it treats big corporations under its watch with a light-touch and does not apply the same penalties as it ­applies to smaller companies.

The requirements that AFSL licence holders must meet are set out in hundreds of pages of documents and “regulatory guides” published by ASIC.

“You must comply with the general obligations from the time your AFS licence is granted and on an ongoing basis,” ASIC states.

“If we have reason to believe that you are not complying with your obligations, we may take ­administrative action, which could include suspending or cancelling your licence.”

Under the law, AFSL holders must provide a written report to ASIC as soon as practicable, or “within 10 business days” of ­becoming aware of a significant “breach (or likely breach)”.

Fronting the banks royal commission, AMP’s Mr Regan lost count of the number of times the company had misled the regulator.