ASIC and Westpac to battle advice definitions in federal court action

A legal battle over the definition of what constitutes ‘personal’ and ‘general’ financial advice will be heard in the Australian Federal Court following Australian Securities and Investment Commission’s decision to bring civil proceedings against Westpac subsidiaries.

ASIC said that it has commenced civil penalty proceedings in the Australian Federal Court against Westpac subsidiaries Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BTFM) for a number of contraventions, including failures of the ‘best interests duty’ introduced under the Future of Financial Advice reforms – a claim that BT Financial Group rejects.

The proceedings, announced via a statement by ASIC follow an ASIC investigation into Westpac’s telephone sales campaigns targeting superannuation fund members. Specifically, ASIC’s case sets out 15 examples of alleged contraventions of the ‘best interests duty’ arising from two telephone campaigns instigated by WSAL and BTFM,

ASIC allegations

ASIC alleges that during the two telephone campaigns, WSAL and BTFM provided personal financial product advice to customers, specifically recommending that customers roll out of their other superannuation funds into their Westpac-related superannuation accounts.

WSAL and BTFM are, according to ASIC, not permitted to provide personal financial product advice under their Australian financial services licences. Further, ASIC alleges that WSAL and BTFM did not undertake a proper comparison of the superannuation funds as required by law.

The law provides enhanced consumer protections and imposes greater obligations on financial advice licensees when they provide personal advice.

ASIC also alleges that WSAL and BTFM have:

  • failed to do all things necessary to ensure that the financial services covered by their  licences are provided efficiently, honestly and fairly;
  • failed to comply with the conditions of their licences which only permits those licensees to provide general advice; and
  • failed to comply with the financial services laws in the Corporations Act.

Westpac defence

According to a report in locally-based news outlet The Australian, Westpac will defend the allegations brought by the Australian Securities & Investments Commission, which accused the bank’s subsidiaries BT Financial Group and Westpac Securities Administration of breaching the “best interest duty” set out under the Future of Financial Advice reforms.

It is understood Westpac will defend the case on the fact that “best duty interests” do not apply to a business operating under a “general advice” license, and that during each of the 15 calls the customer was given the standard general advice warning, the report said.

BT Financial said it rejected ASIC’s interpretation of what constitutes general versus personal advice and will vigorously oppose the action ASIC has brought against it.

‘Important test’

Accordion to The Australian report, BT chief executive Brad Cooper said this would be an important test case for the wealth management industry, which has come under considerable scrutiny in the last few years.

“BTFG conducts superannuation campaigns with the purpose of assisting its customers to consolidate their superannuation accounts. These campaigns involve existing customers contacting BTFG to request more information in relation to their decision to consolidate,” Cooper said.

“In each of the 15 conversations ASIC is using as the base of its case, our customers were given a ‘general advice warning’ as is standard and a required part of our process. We are disappointed that we have not been able to resolve the difference of opinion as to the operation of the law with ASIC.

“We look forward to having the issue determined by the Court to obtain important clarity for the industry,” he said.

ASIC said that it and Westpac will “continue to cooperate to limit the facts in dispute in the proceedings”. The first hearing for the proceedings will be on 2 February 2017 at 9.30am in the Federal Court in Sydney.

ASIC added the the proceedings form part of ASIC’s Wealth Management Project, focusing on the wealth divisions of the major banks, AMP and Macquarie.

ABOUT THE AUTHOR
Gary Robinson
Deputy Editor, International Investment and Head of Video at Open Door Media Publishing. A fully qualified journalist and filmmaker with more than 20 years' financial services experience, both as journalist and originally as an IFA.

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