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The Federal Court has imposed civil penalties totalling $3 million against two Westpac investment businesses, for charging fees for no service and making misleading statements.
BT Funds Management and Asgard Capital Management have each received a $1.5 million fine and have been ordered to publish an adverse publicity order detailing their misconduct and court outcomes on their websites.
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The court found that between September 2014 and August 2017, a total of 404 customers were harmed by BT and Asgard’s conduct.
On at least 487 occasions, BT and Asgard were found to have contravened the ASIC Act and the Corporations Act, by:
making false or misleading representations to customers in customer account statements that no deductions of ongoing adviser fees were being made from customers’ accounts after those customers requested to remove their financial advisers from their accounts; and
engaging in misleading or deceptive conduct by providing customers with account statements that did not show that BT and Asgard were continuing to deduct an ongoing adviser fee from customers’ accounts after those customers requested to remove their financial advisers from their accounts.
The court also found that Asgard had breached its obligation to do all things necessary to ensure the financial services covered by its financial services licence had been provided efficiently, honestly and fairly, a further contravention of the Corporations Act.
Justice Michael Wheelahan criticised the companies’ automated systems in his decision.
“Financial services providers in the position of the defendants should not be able to take the benefits which arise from automated and offshore processes and systems, which it may be inferred contribute to substantial profits, without also undertaking the burden of ensuring that those systems work, and that they promptly identify occasions where they do not,” Justice Wheelahan said.
“An appropriate penalty should have the effect of deterring the defendants, and financial services providers generally, from maintaining defective systems, and conversely, providing an incentive to establish and maintain systems that are reliable.”
However, the court did acknowledge the preparedness of BT and Asgard to make early admissions of liability.
Westpac has indicated that it will be paying the penalties and costs awarded against BT and Asgard.
The two companies’ conduct had been the subject of a case study during the royal commission, which found that BT and Asgard had charged around 767 members fees for financial product advice that had not been provided.
Between December 2017 and March 2018, Westpac remediated $634,490 to its members.
ASIC commenced the civil lawsuit against BT and Asgard on 20 August last year.
The regulator stated it had been monitoring remediation for fees for no service and other failures by financial services institutions, including Westpac.
The ruling has come after ASIC recently flagged that it would end an investigation and take no further action around alleged criminal conduct by AMP advice businesses, relating to fees-for-no-service breaches.
[Related: ASIC releases reference checking protocol for mortgage brokers]
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