News Regulations29 Jun 2018

Australia/New Zealand:Authorities take action

| 29 Jun 2018

The Australian Securities and Investments Commission (ASIC) has commenced proceedings in the Federal Court against AMP Financial Planning (AMPFP) in relation to alleged failure by the latter to ensure its authorised financial planners comply with the best interests duty and related obligations under the Corporations Act.

In a statement, ASIC alleges that certain AMPFP financial planners engaged in ‘rewriting conduct’ – which is providing advice that results in the cancellation of the client’s existing life, total permanent disability, trauma and/or income protection insurance policies and the taking out of similar replacement policies by way of a new application rather than by way of a transfer.

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 the law.

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.

ASIC 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.

The proceeding is listed for a directions hearing in Sydney on 27 July.

Fraud Office

Meanwhile, in New Zealand, the Serious Fraud Office and Reserve Bank of New Zealand are each investigating failed insurer CBL Insurance, according to a joint statement issued by the two authorities.

The Reserve Bank is cooperating with the Serious Fraud Office investigation. The Reserve Bank is also cooperating with the Financial Markets Authority’s investigation relating to issues of market conduct and disclosure by CBL Corporation.

“No further comment on these investigations will be made at this time.,” the statement said.

The Reserve Bank sought CBL Insurance's liquidation in February after learning that NZ$55 million ($37 million) had been paid to overseas recipients against its direct order. The central bank said that there had been significant doubts about CBL Insurance's solvency. The insurer had specialised in providing the insurance behind 10-year builders' guarantees that would cover the cost of fixing faulty building work on new homes.


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