AMP facing fine over advisers who ripped off clients

AMP has abandoned its defence to accusations its financial advisers ripped off clients.

AMP admits failing to properly supervise financial advisers. Pic: Hollie Adams

Embattled financial services group AMP has exposed itself to a penalty of up to $1 million by bowing to the corporate regulator in a lawsuit where it has admitted it failed to properly supervise financial advisers who ripped off their clients.

The Australian Securities and Investments Commission said AMP has abandoned its defence in a Federal Court case in which the regulator accused financial planners at the company of bilking their clients by moving them from their existing life insurance policies into ones that paid higher commissions.

However, AMP still faces possible further legal action from ASIC, which is continuing to investigate it over allegations it charged fees for services that were never provided and misled the regulator.

Last month ASIC also slapped fresh licence conditions on AMP, which was already reeling after its share price was hammered amid an exodus of top brass following a poor performance at last year’s financial services royal commission.

Penalties in the current case will now be decided following a three-day hearing starting on June 19.

ASIC said it would also be seeking orders for a “compliance plan” to make sure AMP did not repeat the misconduct.

“AMP has made these admissions of wrongdoing prior to a contested liability hearing to be held in June which would have lasted two weeks,” ASIC’s commissioner in charge of enforcement, Daniel Crennan, QC, said.

“We welcome this development and are pleased that because of AMP’s admissions, the matter will be resolved significantly sooner than if the matter was fought on liability.”

The regulator had accused some AMP financial planners of “rewriting” - giving clients advice to cancel their existing insurance covering life, total and permanent disability, trauma or income protection and take out similar new insurance that paid them a bigger commission kickback.

The regulator said planners could instead have advised a transfer if a new policy was needed, which would have been less risky for the client but would not have beefed up commissions.

ASIC told the court AMP broke section 961L of the Corporations Act, which says that financial services licensees must take “reasonable steps” to ensure their representatives comply with the law and which carries a penalty of up to $1m.

It also said AMP broke section 912A of the act, which requires licensees to act “efficiently, honestly and fairly” when providing financial services, which when the lawsuit was filed in June last year did not carry any penalty.

Such breaches now carry hefty penalties that for large corporates can be as much as $525m.

Mr Crennan said ASIC was “committed to improving the conduct in the wealth management industry, both by financial advisers and the companies who employ or authorise them, and that the interests of their clients are put first”.

“ASIC will continue to pursue these cases in court to sanction unlawful conduct and deter others from repeating it,” he said.

An AMP spokeswoman said the case related to “historic” behaviour by some financial planners between 2013 and 2015.

“AMP has been cooperating with an ASIC investigation of the matter, which commenced in 2014 shortly after AMP terminated the financial adviser at the centre of the matter and reported him to the regulator,” she said.

“AMP has continued to enhance its monitoring and supervision processes, including stronger data analytics, to help protect clients against insurance rewriting.”