With the Westpac Banking Corp (ASX: WBC) share price trading up 2% on Friday, shareholders seemingly shrugged off an ASIC announcement that it has commenced legal proceedings against the bank for poor advice.
In a media release on its website, the financial services watchdog announced the commencement of civil proceedings against the bank for advice provided by one of its financial planners, Sudhir Sinha.
ASIC said Mr Sinha was a Perth-based financial planner for Westpac between 2001 and November 2014. Earlier this month ASIC banned Mr Sinha from providing financial advice for five years as a result of a failure to meet clients’ best interests and prioritise their interests.
As Westpac was the licence holder standing behind the advice ASIC alleges that the bank is liable for the breaches of Section 961K of the Corporations Act.
“Section 961K of the Act is a civil penalty provision, and attracts a maximum penalty of $1 million per contravention,” ASIC said.
Along with the other big banks and AMP Limited (ASX: AMP), Westpac has an extensive remediation program underway for clients who received poor advice. Westpac is believed to have already paid $12 million to clients of Mr Sinha.
Royal Commission
The banks and major financial services organisations are still dealing with the fallout from the Royal Commission.
A public round of hearings saw many skeletons fall out of the closets of the banks, like Commonwealth Bank of Australia (ASX: CBA), AMP and other financial planning businesses like Dover. The owner of Dover, Terry McMaster, fainted during questioning.
His business was accused of setting up destructive legal contracts that protected the firm more than its clients. ASIC moved to serve Dover with a suspension notice but it was already too much attention for the financial planning group.
“The matter has not gone to hearing but as a result of this notice, Dover and Mr McMaster have advised that, amongst other things, Dover will cease providing financial services,” ASIC’s spokesman said.
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