The Australian Securities and Investments Commission (ASIC) has begun civil penalty proceedings in the Federal Court against Westpac in relation to poor advice provided by one of its former financial advisers.
In court documents filed last week, ASIC alleged Sudhir Sinha breached the best interests duty under the Corporations Act in four sample client files selected by ASIC, provided inappropriate financial advice and failed to prioritise the interests of his clients.
Sinha provided financial advice in the Perth area as a Westpac employee from 2001 to November 2014.
ASIC argues as Sinha’s responsible licensee during that period, Westpac is liable for the alleged breaches of the best interests obligations by Sinha under section 961K of the Corporations Act.
The corporate watchdog also alleges Westpac contravened sections 912A(1)(a) and (c) of the act, which requires Westpac to do everything necessary to ensure the financial services covered by its licence are provided efficiently, honestly and fairly, and to comply with financial services laws.
ASIC banned Sinha in June 2017 from providing financial services for a period of five years as a result of his failure to meet his ongoing advice service obligations.
Section 961K of the Corporations Act is a civil penalty provision and attracts a maximum penalty of $1 million per contravention.
Westpac responded to ASIC’s commencement of proceedings by stating in May 2014 it identified compliance concerns with Sinha by using proprietary data analytics tool Planner Risk Insights.
After detecting breaches, Westpac said it began an investigation, suspended Sinha in September 2014 and dismissed him in November 2014.
“Westpac also proactively initiated remediation to identify and compensate affected customers and has completed remediation activities,” the bank said in a statement.
“In recent years Westpac has also made improvements to its risk management and compliance controls in its financial advice business, building on the capabilities which detected Sinha’s conduct.”
It said it will not comment on specific allegations made in the proceedings as the matter is now before the courts.
ASIC said Westpac has a remediation program in place due to Sinha’s conduct, and as at 14 June 2018 it has paid around $12 million in compensation to clients affected by Sinha’s poor advice and ongoing advice service failures.
The proceeding is listed for a directions hearing in Sydney on 19 June.
