Corporate regulator, ASIC has started Federal Court proceedings against AMP claiming the company and its financial planners who “churned” clients into similar, new insurance policies so they could claim inflated commissions.
These are allegations that so far have not been raised before the banking royal commission. They concern activities by people in AMP Financial Planners (AMPFP).
ASIC also said yesterday it “continues to separately investigate AMP in relation to fees for no service conduct and in relation to the making of false and misleading statements to ASIC.” Those claims were made during the royal commission.
ASIC alleged in a statement late on Wednesday that certain AMP financial planners had engaged in “rewriting conduct”.
This is where a client’s existing life, total and permanent disability, trauma or income protection insurance policy is cancelled and rewritten as a similar replacement policy, instead of being transferred.
The regulator claims that by advising clients to submit new applications, the financial planners stood to receive higher commissions than they would have received under a transfer, whilst at the same time exposing the clients unnecessarily to underwriting and associated risks.
ASIC alleges that this type of advice was inappropriate, and that the financial planners failed to act in the best interests of the clients and to prioritise the interests of the clients.
“ASIC contends that by 1 July 2013, AMPFP knew or ought to have known that its authorised financial planners were (or there was a risk that they were) engaging in rewriting conduct and the detriment this conduct caused to the clients, yet in the period from 1 July 2013 to 30 June 2015 AMPFP failed to take reasonable steps to deal with the conduct in contravention of section 961L of the Act,” ASIC said in yesterday’s statement.
"In support of this allegation, ASIC will rely upon a number of sample client files in which ASIC alleges rewriting conduct occurred. The sample files involve current and former AMPFP authorised financial planners including, among others, Rommel Panganiban, who was permanently banned by ASIC from providing financial services in September 2016, with that decision affirmed on appeal by the Administrative Appeals Tribunal last year.
(Section 961L of the Act is a civil penalty provision, and attracts a maximum penalty of $1 million per contravention).
ASIC said it will also allege that AMPFP has breached other sections of the Act, “which require a licensee to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly; to comply with financial services laws; and to take reasonable steps to ensure that its representatives comply with the financial services laws.”
In a statement on Wednesday AMP said it would "carefully consider" ASIC’s claims and would "work with ASIC to agree a timetable for the progress of the proceedings".
The proceeding is listed for a directions hearing in Sydney on July 27.
