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AMP ordered by Federal Court to pay $5.175m penalty
The Federal Court of Australia on Thursday has ordered financial services giant AMP to pay over $5 million after finding that AMP failed to prevent insurance churn by its financial planners.
Jerome Doraisamy
Earlier today, the Federal Court ordered AMP to pay a $5.175 million penalty after the court found AMP failed to take reasonable steps to ensure its financial planners complied with the best interests duty and related obligations under the Corporations Act.
“By cancelling insurance policies and advising clients to submit new applications, clients were exposed to a number of significant risks and the planners received higher commissions than they would have by simply transferring the policies,” ASIC said in a statement.
The court noted that the rewriting conduct by one of AMP’s financial planners, Rommel Panganiban, was “morally indefensible”.
The court accepted the argument put forward by the regulator that, having become aware of Mr Panganiban’s conduct, it was necessary for AMP to ascertain the extent of breaches by other planners to meet its legal obligations, ASIC said.
AMP failed to do so, it continued, with the court finding that “the lack of an effective response is an illustration of how badly things had gone wrong within the organisation”.
In today’s ruling, the Federal Court identified a total of six contraventions of section 961L of the Corporations Act and thus imposed a penalty of $5.175 million, and 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.
Moreover, a “forward-looking compliance plan that seeks to prohibit rewriting conduct through improved communication, training and supervision by AMP of its financial planners” will be required.
In a statement, ASIC deputy chair Daniel Crennan QC said: “ASIC had a strong case against AMP, which resulted in AMP’s admissions in relation to ASIC’s case in May last year.”
“We now have a decision from the court which agrees with ASIC’s case that AMP failed to monitor and supervise its financial planners properly and in accordance with its legal obligations,” he said.
“ASIC believes the penalty applied by the court today will act as a deterrent to AMP and other financial institutions to engage in such misconduct. AMP and other financial institutions must act in their clients’ best interests.”
In its judgment, the court noted that “this penalty proceeding reflects a lamentable failure of corporate will to take the necessary steps to prevent greedy and unlawful conduct taking place, and a further failure to adopt a swift and proper remedial response”.
Jerome Doraisamy
Jerome Doraisamy is the editor of Lawyers Weekly and HR Leader. He has worked at Momentum Media as a journalist on Lawyers Weekly since February 2018, and has served as editor since March 2022. In June 2024, he also assumed the editorship of HR Leader. Jerome is also the author of The Wellness Doctrines book series, an admitted solicitor in NSW, and a board director of the Minds Count Foundation.
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