ASIC and Westpac court battle sees mixed outcome

A landmark Federal Court judgment has provided greater clarity between general and personal financial advice, ruling in favour of Westpac's position. Yet the bank still managed to breach the Corporations Act.

Judge Jacqueline Gleeson said ASIC failed to demonstrate that Westpac Securities Administration Limited (WSAL) and BT Funds Management (BTFM) provided personal financial product advice to 15 customers over the consolidation of superannuation accounts. WSAL and BTFM are only permitted to provide general advice under their respective Australian Financial Services Licence (AFSL).

The judge said each of the 15 phone calls to customers provided general advice "because the callers did not consider one or more of the objectives, financial situation and needs of the customers to whom the advice was given."

However, Gleeson added the Westpac subsidiaries contravened the Corporations Act in 14 of 15 customer phone calls by implying the rollover of super funds into a BT account was recommended. This came about through a "quality monitoring framework" where BT staff were coached in sales technique.

There was an impression that Westpac "was assisting the customer by its rollover service and, particularly by "social proofing", the impression that customers should feel comfortable in accepting the service without giving consideration to their particular circumstances."

In the judge's view this was not being dishonest, but it failed to ensure the financial product advice was provided "efficiently, honestly and fairly", meaning it was in contravention of section 912A(1)(a) of the Corporations Act 2001.

The judgment was handed down on 21 December 2018. It came about two years to the day ASIC first brought civil proceedings against the Westpac subsidiaries. The parties return to court on 7 February 2019.

ASIC confirmed yesterday that it will review the decision. It originally alleged the Westpac subsidiaries breached the 'best interests duty' introduced under the Future of Financial Advice (FoFA) reforms by conducting a telephone sales campaign recommending customers roll out of their super funds into their Westpac-related super accounts without undertaking a proper comparison, as required by law.

At the time these allegations were first aired, BT Financial Group said: "It is important Australians have good quality advice, guidance and information in language they can understand. ASIC's interpretation of how general advice can be offered would be a bad policy outcome for Australians."

BTFG chief executive Brad Cooper also said at the time: "We reject ASIC's legal interpretation that some customers may have thought they were receiving personal, rather than general advice. In each of the 15 conversations ASIC is using as the base of its case, our customers were given a 'general advice warning' as is standard and a required part of our process."

Cooper argued there is a growing trend of Australian's wanting a natural and practical conversation without having to pay for comprehensive personal advice and that this would stand as an important test case for the wealth industry.

Read more: ASICWestpacCorporations ActFinancial AdviceFederal CourtBTFGBT Financial GroupBrad CooperJacqueline GleesonAFSLsuperannuation
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