Subsidiaries cop $750,000 fine for each wronged customer after illegally raking in $650 million funds under management.
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The Federal Court has ordered subsidiaries of Westpac Banking Corp (ASX: WBC) to pay a total of $10.5 million in fines.
The penalty was determined after the High Court decided in February that Westpac Securities and BT Funds had failed to act in the best interests of their customers.
The judgment found that the businesses provided personal financial product advice to 14 clients, even though neither brand was licensed to do so.
According to Australian Securities and Investments Commission commissioner Danielle Press, Westpac was caught “actively conducting” a campaign to bring over clients into the bank’s superannuation products.
“In doing this, Westpac failed to act in the best interests of their customers,” she said.
“Consumers’ decisions about their superannuation are significant long-term financial decisions affecting their retirement income. Financial institutions seeking to influence those decisions by providing financial product advice must comply with the law designed to protect consumers.”
Westpac cops $750,000 penalty per customer
The massive total fine amounts to $750,000 for each wronged customer.
“The penalty of $10.5 million handed down related to calls made to just 14 consumers and should act as a strong deterrent to any entity breaching these provisions of the law,” said Press.
Both Westpac Securities and BT Funds attempted to convert clients via telephone sales campaigns.
ASIC found that the drive resulted in Westpac businesses increasing their funds under management by almost $650 million between 1 January 2013 and 16 September 2016. More than 30,000 customers deposited funds into Westpac super products over that time.
Federal Court justice Michael O’Bryan has not yet published the full reasoning for the penalties handed down to Westpac.
Westpac shares were up 0.43% on Tuesday morning, trading at $25.89. They’ve gained more than 31% this year.
In December 2018, the Federal Court found the Westpac subsidiaries breached their obligations to act honestly and fairly but disagreed that the provided advice was personal.
But, in October 2019, the full court of the Federal Court reversed that ruling, unanimously finding the bank dished out personal advice to the 14 customers.
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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.