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FMA keeping close tabs on Australian Royal Commission as AMP chief Meller departs

Friday 20th April 2018

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The Financial Markets Authority is keeping close tabs on Australia's Royal Commission into misconduct in the banking, superannuation and financial services industry, with hearings this week uncovering misdeeds at AMP and prompting chief executive Craig Meller to fall on his sword. 


Meller resigned today and the financial services firm is reviewing its regulatory and governance framework after royal commission hearings this week found it had misled the Australian Securities & Investments Commission over the charging of customers without providing services. The issues arose from AMP's buyer of resort role, where it had to purchase an adviser's client book if another AMP representative wouldn't buy it. 


ASIC has said it's investigating AMP's conduct in relation to 'fees for no service', and New Zealand's FMA is in "close contact" with its trans-Tasman counterpart and is "monitoring developments at the royal commission closely," an FMA spokesman said in an emailed statement. "We are engaging with all the businesses involved to discuss the implications for their New Zealand operations."


The conduct is isolated to Australia, with an AMP New Zealand spokesman saying the domestic unit operates under a different regulatory and governance framework and uses different operating and distribution models. 


"We do not have the same buyer of last resort contractual model in New Zealand - which is a core focus of many of the current issues being examined," he said. "We continue to maintain an open and transparent relationship with New Zealand regulators – the FMA and RBNZ."


AMP chair Catherine Brenner said the firm "apologises unreservedly for the misconduct and failures in regulatory disclosures in our advice business" and that the board has "been driving much-needed change and improvement in our advice business, which has undergone significant leadership and governance renewal over the past year but we know we have much more to do too." 


Meller said he was "personally devastated" by the issues that were uncovered, but that because they happened under his watch "stepping down as CEO is an appropriate measure to begin the work that needs to be done to restore public and regulatory trust in AMP". 


The Sydney-based financial services firm has identified 15,712 affected customers and refunded A$4.3 million of fees, and an externa review found the 'fees for no service' practices ended in November 2016. The board has also set up a committee to review issues relating to the advice business raised in the hearings. 


The dual-listed shares fell 0.5 percent to A$4.30 on the ASX and 0.9 percent to $4.60 on the NZX. 


The financial services firm's woes in Australia come as the sector is under parliamentary scrutiny in New Zealand, with legislation designed at introducing a customer obligation to advisers currently before select committee. The Financial Services Legislation Amendment Bill seeks to put the client's best interests first and streamline what's been seen as a confusing designation process to more effectively describe whether someone's providing financial advice or simply selling products. 



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