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Major bank busted for misadvice: ASIC

by Sarah Buckley12 minute read
Major bank busted for misadvice: ASIC

Two Westpac subsidiaries have lost their appeal in the High Court and have been found to have breached financial services laws.

Westpac is facing penalties for breaching its AFSL conditions, after losing an appeal over whether its subsidiaries Westpac Securities Administration Ltd (WSAL) and BT Funds Management Ltd (BTFM) breached financial services laws, including the requirement to act in their clients’ best interests and the requirement to act honestly, efficiently and fairly.

The High Court issued its judgement on Wednesday (3 February), when it ruled the big four bank subsidiaries had provided personal advice to members when not being licensed to do so. 

The case, brought by ASIC, concerned two campaigns where Westpac had contacted 15 members via phone and advised each person to accept an offer to roll over their external superannuation accounts into their account with the big four bank.


As a result of the campaigns, Westpac reportedly increased its funds under management by almost $650 million between January 2013 and 16 September 2016.

Background to the case

The major bank had appealed a Federal Full Court decision that the financial product advice given to super fund members over the phone qualified as personal advice, in breach of its Australian Financial Services Licence.

ASIC had first alleged that Westpac and BT Funds Management had breached the best interests duty in 2016, by recommending that customers roll over their superannuation into Westpac-related accounts without undertaking a proper comparison of the funds, as required by law.

The corporate regulator also argued that the group had violated its AFSL conditions through providing personal advice to customers.

The Federal Court ruled in favour of Westpac and BT Funds Management in 2019, finding that they did not supply personal advice during the phone calls and that it had fallen under general advice.

However, after ASIC appealed the decision, the Full Court reversed the ruling in 2019, finding that during calls to 14 of the 15 customers, the Westpac staff had provided personal advice, in breach of the company’s AFSL.

Personal advice, as defined under the Corporations Act 2001, includes financial product advice given to a person in circumstances where a reasonable person might expect the provider to have considered one or more of the person’s objectives, financial situation and needs – as opposed to general advice, where the product advice is not accounting for personal circumstances.

The Corporations Act imposes more onerous obligations on advisers who provide personal advice, obligations which Westpac accepted it had breached if it had indeed provided personal and not general advice.

What the court found 

But the High Court’s new ruling stated the word “considered” in the Corporations Act referred not to an active process of evaluation and reflection but rather meant “taking account of” .

“A reasonable person in the position of each of the members called by Westpac might expect Westpac to have in fact taken into account at least one aspect of the members’ objectives, financial situation and needs,” the High Court’s statement read.

The phone calls further engendered the expectation that Westpac had accounted for members’ circumstances, with the court noting the bank had pre-existing relationship with members and had referenced members’ desires to save on fees and improve the manageability of their super.

Westpac’s staff had “proceeded to confirm the validity of the expressed objectives and appropriateness of the rollover service to achieve them, and then segued into an offer to elect the rollover”, the court’s statement said.

“That the members’ objectives were ‘generic’ or generally applicable did not mean they ceased being personal objectives capable of giving rise to that expectation,” the judgement concluded.

“The general advice statement was given only once, at the beginning of the telephone conversation,” Justice Michelle Gordon added in the judgement. 

“Members were subsequently asked directly about their personal objectives. Members were not encouraged to seek personal advice before deciding whether to accept the rollover service.”

Westpac acknowledged the decision on Wednesday, stating the High Court had provided “important guidance on the distinction between general and personal advice”. 

ASIC commissioner Danielle Press echoed the importance of the judgement in marking the divide between personal and general advice. 

“By clarifying the distinction between tailored, quality, personal advice in the customers’ interest, and general advice given via a sales campaign, today’s judgement will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients,” Ms Press said.

“ASIC will continue to bring enforcement action against misconduct, including advice that is not in the best interests of clients. As noted by the High Court, consumers’ decisions regarding superannuation accounts are significant financial decisions, and ASIC has a focus to lift standards in this area.”

The proceedings will now be remitted to the Federal Court for a further hearing, where ASIC will seek orders for pecuniary penalties. 

[Related: ASIC to update ACL process following security breach]

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