AMP shares fell 4.4% yesterday on top of Monday’s more modest 0.4% fall as investors finally awoke to the growing dangers for the company from the disclosures at the financial services and banking royal commission.
AMP shares ended at $4.55, two cents above the lowest they have been for four years of $4.53 on October 30, 2016. The shares are down more than 12% so far in 2018 as the tide of poor publicity, weak results and concerns over its weak life insurance arm hit investors confidence.
But it was the emerging belief that the company would be damaged by the royal commission – which were finally confirmed this week – which awoke investors to the dangers from the inquiry. The royal commission yesterday for instance, heard that AMP’s financial advice business put profits before customers, misled clients and the regulator and its senior executives influenced an “independent” report and that there was one name omitted from the report, the CEO, Craig Mellor.
The Commission heard in the morning session on Tuesday that AMP had told ASIC that in 2009 it was charging fees after customers stopped receiving advice, by mistake, and that it was moving to correct the practice; however documents presented in the inquiry revealed the practice had been discussed by management and approved, despite legal advice that it should not happen.
The inquiry heard that senior members of AMP repeatedly intervened in an “independent” report produced by law firm Clayton Utz, which had been hired to investigate the wealth manager’s fee for no service scandal, including the removal of chief executive Craig Meller’s name from one of the draft reports. Mr Meller was ultimately named in the final report, which said he was not aware of the practice being scrutinised by the royal commission.
Counsel assisting assisting Michael Hodge QC told the hearing that Clayton Utz had provided 25 drafts of the report to AMP, and described detailed changes made after discussions made with AMP.
Commissioner Kenneth Hayne told the hearing there may be "questions" about "the extent to which senior management or others associated with AMP, sought to influence or did influence, the content of the report by Clatyon Utz apparently submitted to ASIC as an independent report." But by June 2017, the practice had affected about 29,000 clients and AMP was telling the ASIC its processes had failed, even though there were no processes to stop the misappropriation of funds.
“Do you agree with me that statement (to ASIC) was also misleading because there was no reference or explanation that, in fact, in some cases it wasn’t a failure of process, it was a deliberate decision that had been made by AMP,” Michael Hodge, counsel assisting the commission asked AMP’s current head of advice Anthony Regan. “The answer to your question is yes,” Regan responded.
The Royal Commission also heard that the AMP lied or misled the Australian Securities and Investments Commission 20 times about its business practices, which resulted in clients being charged fees for services they didn’t receive, the financial services royal commission heard on Tuesday.
