It’s looking like the class actions are about to pile up against AMP.
Slater and Gordon has partnered with international litigation funder Therium to investigate the possibility of a major investor class action against Australia’s oldest wealth manager.
The announcement comes after global litigation powerhouse Quinn Emanuel Urquhart & Sullivan announced that it is also looking into a class action against the financial services behemoth, with backing from Burford Capital.
Slater and Gordon also recently announced it is probing filing a class action against Brambles. The firm teamed up with IMF Bentham for that move.
Ben Hardwick, Slater and Gordon’s head of class actions, said that the AMP claim could become one of Australia’s largest investor class actions.
“More than a billion dollars has been wiped from AMP’s market cap since these revelations were made public during the Royal Commission hearings and it has left thousands of investors reeling,” Hardwick said. “Not only did senior executives admit AMP had been charging significant fees for financial advice services it did not provide, but they also admitted the bank tried to conceal these practices by repeatedly telling ASIC they were the result of an administrative error.”
“We allege that this conduct was both unlawful and unethical and reflected serious compliance problems within AMP, and the market had a right to be informed about what they were buying into,” he said.
Allegations against AMP
AMP issued a breach report to the Australian Securities and Investments Commission on 27 May 2015 about the regular practice of charging ongoing fees to customers in circumstances where they received no services.
The proposed class action will allege that AMP should have disclosed to the ASX from 27 May 2015 that:
- “for many years, it had regular business practices of charging financial advice customers ongoing service fees in circumstances where it knew it was not entitled to charge those fees because it was not providing any services to those customers;
- “it made numerous false and misleading statements to the Australian Securities and Investments Commission (ASIC) designed to present the problem of charging ongoing services fees where it was not providing any services as being caused by administrative oversight or error rather than deliberate business practices; and
- “the practice of deliberately charging customers in circumstances where AMP knew it was not entitled to do so, and the subsequent misleading of ASIC, arose from inadequate monitoring, reporting and governance controls, and a lack of verification procedures and proper oversight of interactions with ASIC.”
“We allege this conduct escalated and continued without being disclosed until it was ultimately revealed in the Royal Commission in the week commencing 16 April 2018,” Hardwick said.
Hardwick, who also heads the firm’s industrial law group, said that AMP’s practice of charging fees for no service is centred around the company’s advice business buyback program.
“Rather than being directly employed by the bank, financial advisers working under the AMP brand were usually independent businesses giving advice as an AMP authorised representative. Under their agreement, AMP was required to buy back advisers' client books with sufficient notice, usually when advisers wanted to retire, close their practice or leave the industry,” Hardwick said.
“AMP was not able to provide financial advice services itself, so problems arose when the bank failed to find suitable buyers for the client books that it was required to purchase within the notice period,” he said.
This led to “90-day exceptions” and “ring-fencing,” Hardwick said. Under 90-day exceptions, AMP began an informal policy of collecting fees from clients who did not have new financial planners allocated. Under ring-fencing, AMP continued to charge fees from clients who did not have planners allocated to retain the resell value of client books. Purchasers would not pay as much if they had to reapproach clients to start charging fees after collection had been stopped, Hardwick said.
The class action will be open to shareholders who bought Amp shares between 28 May 2015 and 13 April 2018.