Australian investment manager AMP has been handed a fine of $5.17m by the Federal Court due to its failure to prevent the unlawful behaviour of some of its financial planners of churning customers into new policies to earn more commissions.

The Court alleged that AMP lacked the “corporate will” to reprimand its financial planners who were involved in re-writing to gain higher commissions.

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This implies the cancellation of a customer’s insurance policy and then arranged for a new insurance application instead of transferring the current one. The process makes a customer vulnerable to more risk.

AMP was accused of failing to take quick measures to tackle the problem.

The firm was particularly called out for its handling of the case of financial planner Rommel Panganiban and failing to highlight the scale of the misconduct.

According to the Court, Panganiban’s conduct was “morally indefensible” and yet AMP failed to take immediate remedial measures even after concerns were raised on the same in December 2012.

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Rather, in audits, Panganiban secured “a green 4” rating that is the second-highest rating possible and a “B” rating that is the second-highest possible.

“Panganiban, though undoubtedly a rogue, fell through holes in what may well have been an expensive, but was an inadequately operated compliance system,” the Court stated.

Panganiban’s misconduct is said to have impacted 161 clients. In 2014, Panganiban’s status as an authorised representative was revoked and in 2016 ASIC banned Panganiban from offering financial services.

ASIC deputy chair Daniel Crennan QC said: “ASIC had a strong case against AMP, which resulted in AMP’s admissions in relation to ASIC’s case in May last year.

“We now have a decision from the Court which agrees with ASIC’s case that AMP failed to monitor and supervise its financial planners properly and in accordance with its legal obligations.”