19 April 2018Hot off the Press
It has been a busy and revealing two days of hearings for the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. On Tuesday the Royal Commission heard that AMP was deliberately charging customers fees without actually providing any services, and had told the Australian Securities and Investments Commission (ASIC) that these charges were mistakes.
Anthony Regan, AMP’s Head of Financial Advice, admitted to the Royal Commission that he had lost count of the number of times AMP had mislead ASIC. Correspondence revealed that AMP knew it was charging fees for 90 days of financial advice that it did not intend to provide, that this was a matter of policy, and that it wasn’t stopped because it was profitable.
Regan stated that, “it’s clear that we preferenced the interest of shareholders … at the expense of clients”, and confirmed that AMP had put the profitability of the Company above the law.
On Wednesday, Treasurer Scott Morrison issued a statement concerning AMP’s charges:
What has occurred here and what has been admitted to in the royal commission by AMP is deeply disturbing.
They have said that they basically charged people for services they didn’t provide and they have admitted to statements that were misleading to ASIC and to their own customers, and this is deeply distressing.
This type of behaviour can attract penalties which include jail time. That’s how serious these things are. I am very reassured by the fact that these matters were already being pursued by ASIC and will continue to be pursued by ASIC.
A statement released by ASIC on Wednesday confirmed that the regulator was conducting ongoing investigations into the matter, and has received thousands of documents and examined AMP staff. ASIC reiterated that financial institutions must cooperate with ASIC and comply with the law, or face civil and criminal sanctions.
But AMP isn’t the only institution charging fees without providing services. When the hearings continued on Wednesday, Linda Elkins, Executive General Manager of Colonial First State, part of the Commonwealth Bank of Australia (CBA), conceded that CBA “would be the gold medallist if ASIC was handing out medals for fees for no service” under questioning from Mark Costello, counsel assisting the Royal Commission.
At the end of 2017 CBA owed $118.5 million in refunds and interest to affected customers — more than half the combined total owed by the big four banks and AMP.
Michael Hodge QC questioned Marianne Perkovic, Executive General Manager of Private Bank at the CBA, about whether the bank was giving adequate attention to its clients. Commonwealth Financial Planning experienced a doubling of client numbers over the past decade, but a decline of 25% in the number of financial advisers.
The afternoon was marked by Ms Perkovic’s evasive answers, with Mr Hodge remarking, “I’m sorry Ms Perkovic, I just can’t tell if you’re deliberately not answering my question.” Eventually Commissioner Kenneth Hayne intervened to advise the witness that “you will get on better if you listen to counsels’s question — if you have to stop and think about the question, do it — but listen to counsel’s question and answer what you’re asked.”
After delivering yet another non-answer, the Commissioner lost patience and said: “Ms Perkovic, I do not regard that as answering counsel’s question. … I want you to listen to it [again] and I want you to answer it as directly as you can.”
The question was in relation to Commonwealth Financial Planning taking more than two years to notify ASIC of a breach of financial regulations. An internal CBA memo from 2012 discussed problems associated with the financial planning services, particularly concerns that clients were still be charged fees despite their financial planners having left the business.
Ms Perkovic denied that there was a problem, maintaining that the memo asked her to investigate potential problems rather than indicating that CBA senior executives had knowledge of a problem. “The memo was telling me that I needed to investigate … the unknown issue,” Ms Perkovic said.