ASIC launches suit against Westpac’s BT, Asgard, and StatePlus over fees for no service

Westpac’s has a new headache after ASIC toook new action stemming from the Hayne inquiry.

Australian Securities & Investments Commission chairman James Shipton at the Hayne royal commission in 2018.

The corporate watchdog has kicked off a new round of ‘fee-for-no-service’ lawsuits stemming from the financial services royal commission, commencing civil penalty proceedings in the Federal Court against two Westpac subsidiaries and a superanation advice business and flagging its intention to bring further cases to court before the end of the year.

The Australian Securities and Investments Commission on Thursday launched proceedings against Westpac-owned BT Funds Management and Asgard Capital Management, and separately, against StatePlus Super, the advice arm of industry super fund First State Super, for charging customers fees where no service was provided.

BT, Asgard and StatePlus were all case studies heard at the financial services royal commission in 2018.

In its case against BT, the regulator alleges that between mid-2014 and mid-2017, the wealth manager made misleading representations in statements that appeared to show adviser fees were no longer being charged, with the “adviser fee” line removed from the account statement.

An amount equal to that fee was added to the administration fee amount, the corporate watchdog said.

It also alleges that over the same period, 404 Asgard customers were charged more than $130,000 in adviser fees for financial advice that was not provided.

In a statement to the market on Thursday afternoon, Westpac said it accepted the allegations and didn’t intend to defend the proceedings.

“BT and Asgard apologise that these errors occurred and will work with ASIC to resolve the proceedings as quickly as possible,” Westpac said.

ASIC deputy chair Daniel Crennan said he welcomed Westpac’s position on the case.

“That means that we can proceed to the penalty phase. That type of response to these sort of systemic misconduct cases, or alleged misconduct, is something that the larger entities, I think, ought to at least contemplate,” he told The Australian.

“Certainly several of them have responded to our cases, particularly those cases that either arose from the royal commission or relate to the royal commission in some way. And I think that’s a very sensible way of responding, if they wish to.”

Acknowledging the challenges the COVID-19 pandemic has had on the regulator’s ability to stick to its royal commission program, Mr Crennan flagged further proceedings were in the pipeline.

“It is likely that there will be further fee-for-no-service cases before the end of the year,” he said.

“On the whole, I think most of the regulated community understands that it’s best for them, best for society, and best for us, obviously, for these royal commission cases to be brought to court and be dealt with one way or another.

“Obviously COVID-19 does impact on our work and our ability to continue with the Royal Commission program that we’ve got in place, but I think, on the whole, [we’ve successfully adapted] to continue to operate within the restrictions of COVID-19,” he said.

The banking royal commission, which uncovered systemic fee-for-no-service scandals among a raft of financial institutions, including the big four banks and AMP, found that between 2001 and August 2017, BT and Asgard charged around 767 members fees for financial product advice that was not provided.

ASIC’s suit is focused on the last six years of that period, under the statute of limitations.

The regulator said it was seeking declarations and pecuniary penalties from the Federal Court to prevent similar contraventions occurring in the future.

In separate proceedings, ASIC alleges that StatePlus, between April 2013 and June 2018, charged at least 36,592 members fees for advice it didn’t provide and that it contravened its overarching obligations as an Australian financial services licence holder to act efficiently, honestly and fairly.

StatePlus was acquired by industry fund First State Super in 2016.

Responding to the proceedings, First State on Thursday said after the acquisition it became aware “of numerous instances where StatePlus clients had not received a promised annual review”.

“This led us to promptly self-report these issues to ASIC and undertake an organisation-wide investigation,” it said.

The maximum civil penalty for the alleged contraventions against StatePlus are between $1.7m and $2.1m. StatePlus has remediated over $100m to members affected by its conduct, ASIC said.

ASIC’s most recent actions, the third and fourth enforcement actions it has commenced concerning the fee-for-no-service scandal, come after it launched proceedings against NAB entities NULIS and MLC Nominees in 2018 over fees charged to super members where no service was provided, and against NAB in 2019, alleging that the bank engaged in unconscionable conduct from at least May 2018 by continuing to charge ongoing fees to customers when it knew that it had not delivered the necessary services.

The hearing for NULIS and MLC has concluded and judgment on liability and penalty has been reserved, while a trial date is yet to be scheduled for the NAB case.

The corporate regulator in December issued a “no-action letter” to former NAB chief executive Andrew Thorburn, who exited the bank just days after royal commissioner Ken Hayne delivered a scathing assessment of the lender following the fee-for-no-service scandal.

In his final report made public in February 2019, Mr Hayne said that, after hearing the evidence of Mr Thorburn and NAB chairman Ken Henry, he was “not as confident as I would wish to be that the lessons of the past have been learned”.

“I thought it telling that Dr Henry seemed unwilling to accept any criticism of how the board had dealt with some issues,” the royal commissioner said.

“I thought it telling that Mr Thorburn treated all issues of fees-for-no-service as nothing more than carelessness combined with system deficiencies when the total amount to be repaid by NAB and (its trustee company) NULIS on this account is likely to be more than $100m.”

Former AMP chair Catherine Brenner and Mr Thorburn’s colleague at NAB, ex-consumer banking and wealth boss Andrew Hagger, have also received similar “no-action letters” from the conduct regulator.