ASIC seeks $36m court hit for AMP

The corporate regulator wants penalties of as much as $36 million imposed on under-fire wealth group AMP.

AMP is under fire in court. Picture: Hollie Adams

The corporate regulator wants penalties of as much as $36 million imposed on under-fire wealth group AMP, as the parties squabble in the Federal Court over the extent of financial planner wrongdoing.

In an interesting twist, though, the Australian Securities & Investments Commission is pursuing two lines of argument in the court. The first says there were 120 contraventions of the law, which implies penalties of between $24 million and $36m.

A fallback argument of six contraventions would see a penalty in the order of $5m.

But the parties are at odds, with AMP saying it believes there were two contraventions equating to a penalty of between $1.2m and $1.5m.

The case centres on AMP advisers failing their best interest duty to customers by engaging in “rewriting conduct”, which involves getting a customer to cancel a life or other insurance policy and apply for a new one, allowing the planner to rake in more commissions.

While AMP accepts the wrongdoing occurred, the quantum will be decided by the court.

ASIC started proceedings a year ago after AMP was hit by revelations at the Hayne royal commission, including that it misled the regulator.

ASIC’s barrister, Sarah Pritchard SC, said AMP made a “deliberate decision” not to address issues among its financial planners and did not take reasonable steps. “These risks were not trivial,” she said, noting the action of the advisers caused customer ­detriment.

“Management were aware of this conduct and had the ability to do something but failed to do so,” she said.

“The overarching (best interest) obligation applies to every piece of advice.”

ASIC is relying on a number of sample client files of current and former authorised planners including Rommel Panganiban, who was permanently banned by ASIC from providing financial services in 2016.

AMP says its internal panel found the rewriting issue among advisers was the result of a “bad apple” rather than widespread.

Judge Michael Lee questioned, given the contents of emails and other documents, whether ASIC should be pursuing the issue as a widespread one.

He also cited various precedents that may be taken into account in the case. “That leaves me with something I need to think about,” Justice Lee said.

The precedents and the differences in argument also left a lot of room for an appeal. “There is a real prospect that one party is going to seek appeal on that front,” he added.

In a case earlier this year, ASIC and Westpac had to return to court after a judge failed to sign off on a settlement because in part there was disagreement over the number of breaches. That case related to potential breaches of responsible lending laws.

Yesterday an AMP spokeswoman said: “AMP has continued to enhance its monitoring and supervision processes, including stronger data analytics, to help protect clients against insurance rewriting. We contend insurance rewriting was not a widespread practice.”

AMP’s shares yesterday fell almost 1 per cent to $2.07, a record low closing price.

The court hearing, slated for three days, continues.