Westpac lost hands down yesterday in the High Court, when the Court confirmed that Westpac Bank subsidiaries, Westpac Securities Administration Limited and BT Funds Management Limited breached financial services laws, including the requirement to act in their clients’ best interests and the requirement to act honestly, efficiently and fairly.
Between January 2013 and September 2016, Westpac conducted a campaign to encourage existing members to roll over superannuation accounts held with other entities into their BT account.
Each clients was sent written communications by which Westpac offered to search for any external superannuation accounts they had, offered to roll over such accounts into their BT account, and sought to influence the member to take up those offers.
“The objective of the campaign was to increase Westpac's funds under management,” Justice Michelle Gordon wrote.
“As a result of the campaign, Westpac increased its funds under management by almost A$650 million.”
Chief justice Susan Kiefel, joined by three more justices, wrote that Westpac, having recommended that clients “accept Westpac's offer to procure the roll-over of the member's external superannuation accounts into the member's BT account [must] have considered one or more of the member's objectives, financial situation and needs.
“Given that, the appeal must fail.”
Penalties, remitted to the Federal Court, may turn out to be extreme.
ASIC Commissioner Danielle Press said yesterday “The High Court has provided clarity concerning the differences between personal advice and general advice. Westpac were actively conducting a sales campaign aimed at rolling customers into Westpac products under the banner of general advice.
“By clarifying the distinction between tailored, quality, personal advice in the customer’s interest, and general advice given via a sales campaign, today's judgment will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients.
“ASIC will continue to bring enforcement action against misconduct, including advice that is not in the best interest of clients. As noted by the High Court, consumers’ decisions regarding superannuation accounts are ‘significant financial decision[s]’ and ASIC has a focus to lift standards in this area.”