Mercer fined $12m after ASIC argue it wrongly billed customers $14m

Corporate regulator ASIC has had a win against financial giant Mercer after taking action over the firm’s billing of customers despite not providing a service.

ASIC deputy chair Sarah Court. Picture: Aaron Francis

Financial giant Mercer has been fined $12m after it was caught wrongly billing thousands of customers $14.4m for services they never received.

The Federal Court hit Mercer Australia, the local arm of the sprawling financial services giant, with the fines on Tuesday after earlier finding in favour of the corporate regulator.

The Australian Securities and Investments Commission had taken aim at Mercer alleging it had for years billed customers for services it never provided.

ASIC also claimed Mercer had sent documents to customers on the assumption they were accurate fee disclosure notices, when in fact they were not compliant.

The court found affected clients paid $14.4m in “inappropriate ongoing fees”.

Justice Timothy McEvoy found Mercer breached sections of the Corporations Act and the ASIC act between at least July 1, 2016, through to June 2019.

The judge found while Mercer’s failings were not intentional, they were caused by inadequate policies, systems and procedures.

However, Justice McEvoy “more alarmingly” found Mercer could not have identified its failures as its records and systems “have not allowed it to identify the root cause of the issue, or the circumstances in which the compliance deficiencies arose”.

Mercer is one of the largest financial services providers in the world, with a significant presence in investments, financial services, and superannuation.

The company also holds a major role in insurance through its sister company Marsh, which acts as a broker to some of the biggest companies in the world.

ASIC deputy chair Sarah Court said the penalty against Mercer was “significant”, showing the company had “failed in its obligation to provide fee disclosure statements to clients, provided misleading information in the disclosure statements it did provide, and charged its clients fees for services it was not entitled to charge”.

“ASIC expects businesses to invest properly in their compliance systems. As today’s outcome shows, if they fail to do so, they face significant penalties,” she said.

ASIC had pushed for a $20m fine for Mercer, against the company’s proposed $8.5m penalty.

Justice McEvoy said ASIC’s proposed fine was “excessive”, noting Mercer had remediated its clients and co-operated with the regulator in the investigation and court case and made “full admissions at the earliest opportunity”.

However, Justice McEvoy noted ASIC “emphasises that Mercer’s size and financial position is relevant in the present circumstances in the sense that the penalty required to achieve the necessary deterrence is likely to be larger for a company with significant resources”.

A Mercer spokeswoman said the company self reported to ASIC and “took prompt action to ensure all affected clients were fully remediated”.

“We completed the remediation in May 2021, before proceedings commenced,” she said. “Mercer Financial Advice co-operated fully with ASIC and we have strengthened our practices in this regard since the issue was first identified.”

The findings against Mercer comes as ASIC said it would ramp up enforcement activity, with Ms Court, the deputy chair, defending the regulator’s action against big business.

She told ASIC’s annual forum on Tuesday the regulator was committed to targeting the big end of town as the potential for harm was far greater.

On Wednesday ASIC also accepted a court enforceable undertaking from iExtend, after investigating the company on suspicion it was operating without a financial services licence.

iExtend had allegedly offered to pay life insurance premiums in exchange for a cut of the final payments. The court enforceable undertaking requires iExtend to apply for a licence.

Originally published as Mercer fined $12m after ASIC argue it wrongly billed customers $14m