Prior to the release of the royal commission final report, Morningstar analysts were confident that Hayne would force AMP and other financial services giants to dismantle their vertically integrated models, where product manufacturing and distribution are wholly owned by the same company.
“The royal commission’s decision not to break up AMP’s vertically integrated wealth management business model is a key risk that increasingly appears to have been avoided,” Morningstar analyst Chanaka Gunasekera said.
“Nevertheless, the final report raises several issues for AMP that are likely to keep its misconduct in the public eye, which we expect to continue to be an obstacle to attracting financial advisers.
“Of particular note is the potential for criminal proceedings against it and some of its leaders.”
The analyst said that the final report also includes a “smorgasbord of evidence” for the class action lawyers circling AMP as well as regulators for breaches of civil law.
Hayne’s final report invited ASIC to consider whether criminal proceedings for contraventions of the Corporations Act should be instituted against a number of entities that gave evidence that they allegedly charged clients ‘fees for no service’.
“The commissioner did not name the entities he referred to ASIC but AMP was one of the entities caught up in the scandal during the commission hearings, and we expect there is a high likelihood that it is one of the organisations referred to ASIC,” Mr Gunasekera said.
ASIC this week responded to the final report, confirming that it plans to fully implement the recommendations that fall under its bailiwick.
“The royal commission identified ASIC’s enforcement culture as the focus of the change needed at ASIC,” the regulator said.
“The royal commission also identified that ASIC had acknowledged the need for that change and had already initiated action to do so.
On 7 August 2018, ASIC obtained additional funding from government to accelerate its enforcement outcomes. In October 2018, it adopted a ‘why not litigate?’ enforcement stance and publicly committed to that posture going forward.
The corporate watchdog has since initiated an Internal Enforcement Review (IER), led by deputy chair, Daniel Crennan QC, and assisted by Michael D Wyles QC, Professor Ian Ramsay of The University of Melbourne and Deputy Commissioner Leanne Close of the Australian Federal Police.
“ASIC put in place a series of interim measures to ensure a strong focus on court-based outcomes while that review took place,” ASIC said.
“The IER, completed in December 2018, includes a number of significant recommendations, foremost being the establishment of an office of enforcement within ASIC.”
