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The corporate watchdog has scored a big win against insurance giant AMP (ASX: AMP) in a case it brought before the Federal Court in July last year, with the court today fining five subsidiaries a total of $14.5 million for charging unlawful fees on corporate-sponsored superannuation accounts.
The fine is at the upper end of expectations after the Australian Securities and Investments Commission sought a penalty of $17.5 million against the company. AMP was hoping for a $4.6 million fine.
In handing down his judgment, Federal Court Justice Mark Moshinsky has dismissed the charge against one of the AMP subsidiaries, AMP Services. The penalties were imposed on the remaining five defendants - AMP Superannuation, AMP Financial Planning, Charter Financial Planning, Hillross Financial Services and AMP Life.
AMP Life, which is now part of the Resolution Life Group but was part of AMP when the fees were charged, took the biggest hit in today’s judgement with its share of the fine totalling $6 million.
ASIC had originally alleged that between July 2015 and April 2019 the AMP companies charged advice fees on 1,540 super accounts in an employer-sponsored product known as Flexible Super, despite being notified that those customers were no longer able to access the relevant advice.
ASIC alleged that AMP charged the members even after the customer had left their employer-sponsored super account. It also alleged that AMP had failed to ensure that a system was in place to prevent this from happening.
While ASIC’s original filing alleged AMP received more than $600,000 in advice fees from affected customer accounts, the court found a total of $356,000 in service fees was deducted from the accounts of 1,452 members.
“There was no entitlement to charge or deduct the plan service fee from the members account and the planned service fee should have ceased being deducted from the members account,” says Justice Moshinsky in handing down AMP’s penalty.
“The defendants have admitted they have contravened the relevant provisions of the legislation.”
The latest court win followed ASIC’s earlier proceedings against AMP companies alleging that they had charged life insurance premiums and advice fees to more than 2,000 customers who were dead.
A decision on those proceedings, where AMP is alleged to have collected $500,000 in fees from the alleged contravention, is yet to be handed down.
ASIC deputy chair Sarah Court says today's Federal Court ruling sent an important message to the superannuation industry.
‘Superannuation trustees should treat the penalty imposed today as an important reminder to maintain robust internal governance and assurance arrangements," she says.
"Trustees are responsible for ensuring they only deduct fees from member accounts for services actually provided. If they fail in this obligation, they could face significant penalties."
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