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Westpac companies failed to give correct "super" advice

BIScom Subsection: 
Editorial Staff

Another day, another judgment against an Australian banking group for misconduct. The Australian Securities and Investment Commission's civil action against two WestPac group companies ended with findings of fault - but, again, ASIC has not succeeded on grounds upon which it thought it was safe. Spoiler alert: the case was commenced before the start of the Royal Commission on Misconduct in Banking, etc.

The Australian Federal Court handed down its judgment (PDF) just as everyone was going home for the Christmas and New Year holiday. Neither party in the civil action went home with all the presents but then again nor did either side get up to find Santa eaten all the mince pies but left an empty stocking.

The judgment sets out what ASIC found when it listened to recordings of salesmen representing WestPac companies Westpac Securities Administration Limited (WSAL) and BT Funds Management Limited (BT Funds).

In short, there was a pattern of calling existing customers and encouraging them to move funds from their superannuation schemes and into a scheme from which WestPac group would make a profit, and when doing so failing to ensure that to do so was in the customer's best interest.

ASIC said that the companies breached the "bests interests duty" (sic) by failing to comply with a legal requirement that there must be a diligent comparison of the two funds.

That, the Court said, was correct. So ASIC gets a Christmas orange.

However, the Court also found that "no..reasonable person would expect consideration" of "one or more of the customers' objectives, financial situation and requisite intent." As a result there was "no personal advice given." So there's a bag of walnuts for Westpac.

But, on closer reading, it's clear the WestPac got out by the skin of its teeth. Gleeson, J said "on the assumption that WestPac's "financial product advice" was "personal advice,"I am satisfied that Westpac did not act in the best interests of the customers to whom it gave that advice." Then he said it wasn't and so it didn't count.

However, the above maligns the importance of the judgment: Gleeson, J took the case apart on linguistic grounds and took the meaning, relevance and importance of words and phrases into consideration. It is rare to see a Court expecting parties to "say what they mean and mean what they say," as the old adage goes. The format in which the judgment is presented is a bit irritating but the content is fascinating.