Case note: Westpac penalty in personal advice case

In Australian Securities and Investments Commission v Westpac Securities Administration Limited, in the matter of Westpac Securities Administration Limited [2021] FCA 1008  the Federal Court fined Westpac a total of $10.5m ($7m by Westpac Securities and $3m by BT Funds Management) over a superannuation consolidation marketing campaign which was not in the customers’ best interests and not providing financial services efficiently, honestly and fairly.

The High Court of Australia previously dismissed Westpac’s appeal against the Federal Court Full Court’s decision that the marketing campaign by Westpac and BT to encourage customers to roll over superannuation accounts into their account held with Westpac and BT involved the provision of “financial product advice” that was “personal advice” within the meaning of section 766B(3) of the Corporations Act.

Judge O’Bryan’s reasons for the penalty included consideration of Westpac’s past conduct.

He said:

“I accept ASIC’s submission that, where there is a history of non-compliance with similar legal obligations across a corporate group, a higher penalty may be required for the purpose of achieving deterrence. However, the relevance of the past contraventions depends upon the degree of similarity with the instant contravention…

In my view, the previous contraventions the subject of the Westpac BIO (best intersts obligations) case and ASIC v BT Funds (no adviser fees) are relevant to the assessment of penalty in the present case. However, I do not consider that the other previous contraventions relied upon by ASIC (the Austrac case and the BBSW Case) have significance for present purposes as the contravening conduct in those proceedings lack sufficient similarity to the conduct in the present case…”

With respect to contrition or remorse, Judge O’Bryan concluded that:

“The Court was informed that to date, Westpac has not sent any correspondence to the affected members, nor has correspondence containing any apology to those members been proposed, despite the passage of time. It is difficult to escape the inference that, to this day, the defendants do not truly accept that their conduct constituted a contravention of the law, or any failing on their part, despite the judgments of the Full Court and the High Court…

The contravening conduct involves very serious contraventions of the financial services laws that are aimed at consumer protection. The conduct was engaged in by entities that are members of one of Australia’s largest financial institutions, Westpac Banking group, and which occupied a position of trust in relation to the persons affected by the conduct. The conduct involved Westpac’s representatives expressing opinions or making implied recommendations to members of the BT funds which were intended to influence the member to roll over the member’s external superannuation account into their BT account, and that was done in circumstances where a reasonable person might expect Westpac to have considered one or more of the member’s objectives, financial situation and needs. Westpac contravened s 961B(1) and thereby s 961K(2) of the Act because, in giving personal advice, Westpac failed to act in the best interests of the members. Put bluntly, Westpac considered and acted in its own self- interest, rather than considering and acting in the member’s best interest. The conduct was deliberate, in the sense that it was the result of a planned campaign, and was not the result of unexpected or rogue behaviour by Westpac’s representatives. The compliance framework for the campaign was shown to be wholly inadequate and the individual seemingly charged with the “front line” compliance role was not qualified to perform that role. Subsequent to the commencement of these proceedings, and even after their finalisation in the High Court, Westpac has not expressed regret for the conduct, does not appear to have taken steps to remedy the compliance deficiencies and has been tardy in progressing a remediation plan. This is the third instance, in recent years, of significant noncompliance with financial services law by Westpac Banking Corporation. All of those factors point to a penalty at the highest levels permitted by the Act.”

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David Jacobson

Author: David Jacobson
Principal, Bright Corporate Law
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.

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