Mixed result in Westpac judgment

The corporate regulator has notched up another mixed legal result against Westpac.

The corporate regulator has notched up another mixed legal result against Westpac Bank, with the Federal Court declaring a breach of the Corporations Act but throwing out other parts of the case that involved pushing customers into wealth products.

The action by the Australian Securities & Investments Commission alleged that the bank’s wealth arm BT tried to encourage customers to consolidate their savings into Westpac’s own superannuation funds. By doing that, ASIC argued Westpac breached the “best interest duty” set out under the Future of Financial Advice reforms.

In a judgment yesterday, judge Jacqueline Gleeson didn’t agree that Westpac and BT had breached that duty, although she found the entities failed to ensure their services were provided “efficiently, honestly and fairly”.

“I am satisfied that Westpac contravened s 912A (1)(a) of the Act. I will make declarations to that effect. Otherwise, ASIC has not made out its case,” Justice Gleeson said in the judgment.

Westpac said it was considering the judgment.

Debate over section 912A of the Corporations Act has raged this year as a breach does not carry a penalty. The matter has been highlighted by ASIC and the Hayne royal commission.

“ASIC notes the decision including the finding that Westpac Securities Administration Limited and BT Funds Management Limited failed to do all things necessary to ensure that the financial services covered by their licences were provided honestly, efficiently and fairly … but that ASIC did not make out its case that personal advice was provided to the 15 customers,” a spokesman for ASIC said. “ASIC will review the judgment and notes the matter is to return to the court on February 7, 2019.”

A key argument had been that Westpac operated under a “general advice” model, which prohibited it from giving “personal advice” unless the customer was seeking a detailed financial plan. ASIC’s case rested on 15 phone calls with customers.

The legal action was being closely watched by the wealth industry.