Slack AMP cops $5m penalty

Lacklustre investigation into probable breaches by financial planners leaves AMP embarrassed and its management failings recounted in detail by the Federal Court.

The Federal Court has ordered AMP to pay a A$5.175 million penalty over six instances of 'rewriting conduct' in breach of the duty imposed by the Corporation Act to act in their clients' best interests.

ASIC alleged that "a number" of AMP financial planners had advised clients to cancel existing insurance policies and take out new policies rather than simply transferring those policies.

This earned the planners higher commissions, while exposing their clients to higher risk.

Further, after becoming aware of one planner's 'rewriting', AMP management nevertheless failed to check for similar breaches by other planners.

This led Justice Michael Lee to impose higher penalties than might otherwise have applied.

Drawing on expert opinions prepared by AMP and ASIC, Justice Lee slammed the company.

"AMP Financial Planning should have made reasonable efforts to brief an Internal Supervisory/Compliance function … about any Rewriting Conduct which may have been identified through other monitoring and assurance activity," Lee wrote.

"AMPFP should then have escalated the outcomes of the investigation described above to an appropriately accountable Committee.

"Appropriate action should have reflected both the extent and seriousness of any Rewriting Conduct identified across the representative network, the risks to the licensee, and the root cause of the Rewriting Conduct," Lee said.