Federal Court Justice Michael Lee has ordered wealth manager AMP Financial Advice Pty Ltd to pay a penalty of $5.2m for failing to prevent its financial planners’ churn clients’ insurance policies.

He found the penalty proceeding reflected AMP’s “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”. 

ASIC had alleged several AMP financial planners had engaged in “rewriting conduct” – or so-called churning – when providing advice, resulting in clients cancelling existing policies and taking out similar replacement policies in new applications rather than through transfers.

The court found by cancelling insurance policies and advising clients to submit new applications, they were exposed to significant risks and the planners received higher commissions than they would have by simply transferring the policies.

Justice Lee said the rewriting conduct by one of AMP’s financial planners, Rommel Panganiban, was “morally indefensible”.

He accepted ASIC’s case that, having become aware of Panganiban’s conduct, AMP, to meet its legal obligations, had to ascertain the extent of other planners’ breaches.

AMP had failed to do so and Justice Lee found “the lack of an effective response is an illustration of how badly things had gone wrong within the organisation”.

Justice Lee found further AMP had breached s961L of the Corporations Act and imposed the $5.4m penalty.

He also ordered AMP to undertake a review and remediation program to ensure financial planning clients, who were subject to the churning, were detected and properly remediated; plus a forward-looking compliance plan that would prohibit rewriting conduct through AMP’s improved communication, training and supervision of its financial planners.  

ASIC deputy chair Daniel Crennan said ASIC had a strong case against AMP, which had resulted in its admissions in May.

“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.

Justice Lee accepted ASIC’s submission that during the relevant period AMP did not have an adequate “culture of compliance”.

In light of the proposed remediation program and compliance plan, Justice Lee further found AMP had been brought, through ASIC’s persistence, to a position where it was now “committed to doing the right thing”. (ASIC v AMP Financial Planning Pty Ltd (No 2) [2020], FCA 69, 065/02/2020)