The Australian Securities and Investments Commission (ASIC) has called out the major banks and other large financial institutions for taking too long to complete a further review of fees for no service and has threatened enforcement action in at least one case.
The secondary reviews for fees for no service have yet to be completed by AMP, ANZ, Commonwealth Bank, Macquarie, NAB and Westpac. ASIC first asked for the commencement as early as mid-2015.
The Royal Commission found widespread misconduct related to fee for no service, where financial advisers charged fees for advice that was not provided or not provided in full.
ASIC commissioner Danielle Press says: “These reviews have been unreasonably delayed. ASIC acknowledges that they are large scale reviews – they relate to systemic failures over long periods with reviews going back six to 10 years and cover 36 licensees from the six institutions that currently authorise more than 7000 advisers.”
The institutions have collectively paid or offered an estimated $350 million in compensation to customers who were charged advice fees for no service at the end of January 2019.
More than $800 million has been set aside to pay additional compensation for the reviews that have yet to be completed.
“However, we believe the institutions have failed to sufficiently prioritise and resource their reviews, particularly as ASIC advised them to commence the reviews in mid-2015 or early 2016,” Press says.
The delays have been put down to poor record-keeping, failure to meet ASIC’s clear expectations of customer compensation and a legalistic approach.
A CBA spokesperson says: “We recognise this is important to complete in an efficient and timely manner for customers and to date we’ve done this for our salaried advisers. Our priority now is to work with our aligned planners and complete all remaining work.”
ASIC says one of the main reasons for delay is that some institutions have taken a legalistic approach to services they were required to provide.
It was only on Monday that the corporate regulator disclosed that it was able to obtain the file notes from law firm Clayton Utz relating to AMP’s fees for no service.
ASIC commenced legal action in December after AMP and Clayton Utz had claimed legal and professional privilege over a series of documents requested by ASIC, including notes from interviews with AMP staff.
ASIC deputy chair Daniel Crennan QC says: “ASIC is determined to take enforcement action against the major banks and financial service providers and to use all legal powers necessary to investigate the significant issue of fees for no service.”
AMP agreed to pay ASIC’s legal costs and the proceedings were dismissed on last Friday.
AMP says: “Our remediation program is complex and wide ranging. In April 2018, AMP significantly accelerated this process including allocating additional resources to ensure customers are remediated fairly and quickly. We have commenced the customer sampling process across both our salaried and aligned networks.”
“We continue to work closely with ASIC on the ongoing implementation of the program. Most remediation policies and approaches have now been agreed with the regulator.”