AMP has been ordered to pay the hefty penalty for failing to take reasonable steps to ensure its financial planners complied with the best interests duty and related obligations under the Corporations Act.
Financial planners within AMP were found to have engaged in “rewriting conduct”, which means they cancelled and renewed clients’ insurance policies instead of transferring the existing ones. This practice exposed clients to a number of significant risks, while securing higher commissions for planners.
AMP first came to ASIC with the issue in November 2014, after becoming aware that one of its financial planners, Rommel Panganiban, was involved in misconduct.
In its decision, the court noted that the rewriting conduct of Mr Panganiban was “morally indefensible”, but claimed that once it became aware of his misconduct, AMP failed to ascertain the extent of breaches by other planners to meet its legal obligations.
The court ruled that “the lack of an effective response is an illustration of how badly things had gone wrong within the organisation”.
As a result, the court on Tuesday found there were a total of six contraventions of section 961L of the Corporations Act and imposed a penalty of $5.175 million.
The court also indicated that it will make orders requiring AMP to undertake a review and remediation program to ensure financial planning clients who were subject to rewriting conduct are detected and properly remediated.
It is also asking the financial services giant to put together a forward-looking compliance plan that seeks to prohibit rewriting conduct through improved communication, training and supervision of its financial planners.
AMP issues apology
In a statement issued following the ruling, AMP admitted to breaches of the best interests duty and its licensee responsibilities and apologised “unreservedly” for the conduct.
“AMP acknowledges the Federal Court’s decision of six contraventions and a penalty of $A5.175 million.
“While insurance rewriting was not a common practice by financial advisers at AMP financial planning, the conduct identified in the case was clearly unacceptable and customers were let down.”
The giant added that it has since improved monitoring and supervision processes within its advice network and introduced stronger measures to protect clients.