What the case is about?
Slater and Gordon consider that eligible shareholders may have claims against AMP Limited (AMP) in relation to its failure to disclose to the ASX that:
- For many years it had regular business practices of charging 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 the customers;
- It made numerous false and misleading statements to the Australian Securities and Investments Commission 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;
- 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.
On the basis of our investigations to date, we consider that AMP’s failure to disclose the cases described above may have constituted a breach of the ASX Listing Rules and the Corporations Act 2001 (Cth), and caused AMP shares to trade at a price significantly greater than their true value.
When the cases described above were revealed in the Financial Services Royal Commission the AMP share price fell by approximately 10%.
Timeline of events
As part of AMP’s business model, it often buys the “customer book” of financial advisers that operate under an Australian Financial Services Licence held by AMP or its subsidiaries.
AMP’s desired outcome is to on-sell the “customer book” to another adviser, but this is not always possible, or does not always happen quickly.
When AMP bought these “customer books”, it did not provide any advice services to the customers, so its formal policy was that ongoing service fees should be immediately switched off.
However, from as early as 2006, AMP had a number of business practices whereby it continued to charge ongoing service fees to many of these customers, despite knowing that it would not provide them with any advice services and so was not entitled to charge them ongoing service fees.
Those practices continued until at least November 2016, during which time over 15,000 customers were unlawfully charged ongoing service fees while not receiving any services.
On 27 May 2015, AMP made the first of 20 false or misleading statements to ASIC in a breach report concerning charging fees for services not provided, which presented the problems as having arisen from administrative errors or oversights that were recently discovered, when in fact AMP knew that they arose from deliberate business practices that had been in place for a long time.
On 16 and 17 April 2018, these cases were revealed publicly for the first time in the course of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. By the end of that week, AMP’s share price had fallen approximately 10% in response to these revelations.