ASIC starts civil penalty proceeding against Westpac for poor financial advice
The Australian Securities and Investments Commissions (ASIC) has launched proceedings in the Federal Court of Australia against Westpac Banking Corporation in relation to alleged poor financial advice provided by one of its former financial planners, Sudhir Sinha.
Westpac, a financial services and banking firm headquartered in Sydney, Australia, is one of the country’s “big four” banks. The four have come under the spotlight recently for a series of scandals that led to the royal commission setting up an ongoing investigation into mis-selling of financial products.
In court documents filed yesterday ASIC alleges that, in four sample client files selected by ASIC, Sinha breached the “best interests” duty under the Corporations Act, provided inappropriate financial advice, and failed to prioritise the interests of his clients.
Sinha provided financial advice in the Perth area as an employee of Westpac from 2001 to November 2014. In June 2017, Sinha was banned by ASIC from providing financial services for a period of five years as a result of his failure to meet his ongoing advice service obligations.
ASIC contends, as Sinha’s responsible licensee during that period, Westpac is liable for the alleged breaches of the “best interests” obligations by Sinha under section 961K of the Act. ASIC also alleges that Westpac contravened sections of the Act, which requires Westpac to take all necessary measures to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly, and to comply with financial services laws.
Separately, Westpac has a significant remediation programme underway in respect of Sinha’s conduct. Westpac has reported to ASIC that, as at 14 June 2018, it has paid approximately $12 million in compensation to clients impacted by Sinha’s poor advice and ongoing advice service failures.