NSW Supreme Court Approves $100 Million Settlement in ‘Fees for No Service’ AMP Class Action

A photo taken outside an AMP building in Melbourne, Australia, on Aug. 20, 2015. Getty Images

The Supreme Court of New South Wales (NSW) has approved a $100 million settlement between financial services giant AMP and its shareholders over allegations of misconduct.

Over 18,700 investors were notified of the multimillion-dollar settlement and given the chance to raise concerns after parties to the class action reached the agreement on Aug. 20.

Only one shareholder objected to the settlement based on a “misunderstanding” that they were promised full compensation for a drop in share value allegedly caused by AMP’s supposed misconduct.

Barrister Cameron Moore S.C., acting on behalf of the shareholders, told the court the amount reached in the settlement only reflected a portion of the total claimed in the class action.

“They are getting a meaningful percentage of the total cut,” Mr. Moore said on Nov. 14.

Over $82 million will be distributed to the 18,702 group members, while Maurice Blackburn will recoup over $26 million in legal costs, and the two lead plaintiffs will each get $32,000.

The class action was filed in June 2018 and follows reports of misconduct made public by the Hayne Royal Commission into the banking sector.

‘Deliberate Policy’: Shareholders

Shareholders alleged that AMP enacted a “deliberate policy” of charging shareholders fees while providing no services, particularly during the period between May 2012 and April 16, 2018, when an advisor ceased to act on behalf of the customer.

Additionally, shareholders alleged that AMP misled the Australian Securities and Investment Commission (ASIC) with respect to the charges it was levying for services it was not providing.

These matters had been “hotly contested” by the financial firm, the court heard.

“That had a deliberate aspect to it. It wasn’t just an accident,” Mr. Moore said.

AMP argued that share prices could have suffered based on any reputational damage if it had disclosed its charging policy.

The financial services giant also claimed that it did not have to disclose information about its advisory fees to the market, and rejected allegations that the share price drop in 2018 was caused solely by the findings from the Royal Commission.

In his judgment, Acting Justice Michael Elkaim said he accepted that the arguments were “real” and “capable of not only impeding the range of quantum, but extended to success on liability.”

“I have no doubt that each of the arguments put against the plaintiff’s (AMP) would have varied in strength. Nevertheless, I accept they were genuine arguments calling for an appropriate and measured compromise of the claim,” Mr. Elkain said.

‘Misconduct Must End’: Former Treasurer

Following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry (pdf), then-federal Treasurer Josh Frydenberg said misconduct in the financial sector “must end” and the “interests of consumers must now come first.”

“The price paid by our community has been immense and goes beyond just the financial. Businesses have been broken, and the emotional stress and personal pain have broken lives,” Mr. Frydenberg said.

The 2018 Royal Commission made four findings of either law-breaking or fell short of community expectations.

First, in almost every case, the Royal Commission found the conduct in issue was driven not only by the relevant entity’s pursuit of profit but also by individuals’ pursuit of gain.

“Providing a service to customers was relegated to second place. Sales became all important,” the report states.

Second, entities and individuals acted in the ways they did because they could.

“Entities set the terms on which they would deal, consumers often had little detailed knowledge or understanding of the transaction and consumers had next to no power to negotiate the terms,” according to the report.

Third, consumers often deal with a financial services entity through an intermediary.

“The client might assume that the person standing between the client and the entity that would provide a financial service or product acted for the client and in the client’s interests.”

Fourth, financial services entities that broke the law were not properly held to account, the report stated.

“The Australian community expects, and is entitled to expect, that if an entity breaks the law and causes damage to customers, it will compensate those affected customers. But the community also expects that financial services entities that break the law will be held to account,” the report states.

As of May 2023, ASIC had made 32 investigations on top of the 13 referrals made when the 2018 report was published.

ASIC claimed over $82 million in civil penalties, with four cases related to fees for no services.

For instance, in September 2020, the Federal Court of Australia ordered two entities in NAB’s wealth management division to pay a total of $57.5 million in penalties after the court found the bank’s wealth management division made false and misleading representations to superannuation members about their entitlement to charge plan service fees, and members’ obligations to pay the fees.

In February 2022, Aware Financial Services, formerly State Super Financial Services, was ordered by the Federal Court to pay $20 million in penalties for charging over 25,000 customers fees for financial services it did not provide, contravening the ASIC Act.