The lawyer planning to lead a commissions class action case against AMP, Westpac and CBA believes the problem with the existing remediation programs is that only the institutions themselves know how thoroughly wrongdoing is being investigated and compensation awarded.
Speaking to Professional Planner, Piper Alderman partner Martin del Gallego – who is running the case with fellow partner Simon Morris – made clear why the customers being represented are not content relying on the institutions to police their own wrongdoings.
“The point about the remediation programs is they’re in the banks’ hands,” del Gallego said. “So what claims are going to be dealt with… only the banks know.”
Put another way, del Gallego is saying that you can’t expect someone who has been speeding to self-report their velocity and levy an appropriate fine to themselves.
The case will allege that the institutions failed to meet their obligations to advice customers when they were receiving commissions. While the 2012 Future of Financial Advice reforms left pre-existing conflicted remuneration on the table, he asserts, that doesn’t mean it let the institutions off the hook in terms of protecting their clients’ best interests.
“The commissions in place prior to FOFA were grandfathered but the institutions’ obligations to protect their clients’ interests were not absolved,” Del Gallego says. “And the claims that we’re investigating relate to the banks’ failure to do just that.”
According to the firm’s release, the claim is designed to compensate customers who were charged commissions “in contravention of the law”.
Isn’t that ASIC’s job?
If filed, the case could be interpreted as an indictment on the corporate regulator’s role in policing the institutions’ collective efforts to right their respective wrongs.
The remediation programs are focused on identifying and remediating customers who suffered loss or detriment because of non-compliant advice or fees-for-no-service misconduct, and part of ASIC’s remit is to make sure that happens.
Despite the ‘Why not litigate?’ mantra ASIC adopted from Commissioner Kenneth Hayne in October 2018, class action cases are not its thing. Outside of its own enforcement, ASIC does, however, acknowledge the options available for people to “enforce their rights” via private litigation, “including participating in a class action for breach of duty under an Act or under private contract”.
ASIC may step in at some stage, either as ‘amicus curiae’ (ie, to help the court) or as an ‘intervening party’, but only if it sees its involvement as an appropriate use of resources – something which has been under the spotlight in recent times due to proceedings against IOOF and Westpac.
A growing cohort
The claims will purportedly be aimed specifically at licensees owned by the institutions: AMP FP, Charter and Hillross at AMP; CFP, Count Financial and Financial Wisdom at CBA; Securitor and Magnitude at Westpac.
Westpac’s Securitor and Magnitude, as well as CBA’s Financial Wisdom, have all been closed as part of the banks’ collective exodus from wealth management. When it was sold for pennies on the dollar to CountPlus, Count Financial came with a large indemnity provision that left any remediation bills with CBA.
These businesses “contravened specific obligations owed to their customers when taking commissions”, the firm stated.
The class action is to be fronted by Woodsford Litigation Funding on a no win, no fee basis.
The cohort being represented is still coming together, with the firm this week inviting claimants to register for the class actions through a portal on Piper Alderman’s website.
The size of the class action could swell, with del Gallego describing the group thus: “All customers who acquired, renewed or continued to hold a financial product, including life insurance, on the advice of a rep from one of these institutions.”
“These claims have the prospect of recovering significant sums of money for a large number of individuals,” del Gallego stated in the release. “On the institutions’ own numbers, over a million individuals may have been affected.”
The case will be filed “shortly”, del Gallego advised.