The Full Federal Court has upheld the Australian Securities and Investment Commission’s (Asic) appeal that Westpac staff acted inappropriately when cold calling customers, in a case stemming from 2016.
The original decision of the Federal Court in December 2018 said staff at two Westpac subsidiaries, Westpac Securities Administration (WSAL) and BT Funds Management (BTFM), provided “general” – not personal – advice to 15 customers in two telephone campaigns, which were conducted by members of Westpac’s Super Activation Team.
WSAL and BTFM were not licensed to provide personal advice.
But the Full Court reversed that decision; concluding that, in calls to 14 of the customers, Westpac staff did provide them with personal advice.
It also found that WSAL and BTFM, in providing personal advice to their customers, failed to comply with other financial services laws in the Corporations Act, including the “best interests duty”.
Asic said it welcomed “the decision of the Full Court, which provides clarity and certainty concerning the difference between general and personal advice for consumers and financial services providers”.
Details
From 2013 to 2016, Westpac contacted customers by mail and phone offering to help them shift money from other pension funds to its own, boosting its own holdings by about A$650m (£346m, $440m, €400m), according to the Full Federal Court.
Judges said that by “closing” sales and getting customers to transfer pension money in the same phone call, “there was an implied recommendation … that the customer should accept the service”.
The court gave Asic and Westpac two weeks to agree on what public declarations the bank must give.
If they don’t agree, the matter will return to court to determine penalties for the bank.
Best interests
“Westpac attempted, assiduously, to get the customer to make a decision to move funds to BT without giving personal financial product advice as defined in the legislation. It failed.” said chief justice James Allsop.
Justice Michael O’Bryan added: “Westpac took unfair advantage of that asymmetry by implementing a carefully crafted telephone campaign … The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer’s superannuation fund.
“Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters that they should consider before deciding to consolidate their superannuation.
“Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision. Through the campaign, Westpac pursued its own self-interest and disregarded the best interests of its customers.”
Carefully considering
A spokesperson for Westpac said the bank “acknowledges the judgment by the Full Federal Court in relation to the provision of financial product advice, in which the court allowed Asic’s appeal and dismissed Westpac’s cross-appeal”.
“This decision relates to a test case brought by Asic against Westpac Securities Administration Limited and BT Funds Management Limited in relation to calls to 15 customers concerning the rollover of their superannuation accounts,” the statement said.
“In these proceedings, Asic alleged that Westpac had provided ‘personal advice’ and in doing so had breached certain provisions of the Corporations Act.
“Westpac is carefully considering the judgment.”
