AMP AMP Limited

   By Robb M. Stewart 
 

MELBOURNE, Australia--An ongoing sweeping probe of Australia's banking and financial industry on Friday claimed a high-level scalp after AMP Ltd.'s (AMP.AU) chief executive stepped down and the wealth-manager apologized following revelations it misled a regulator over fees charged to customers for advice it failed to deliver.

The immediate departure of AMP boss Craig Meller coincided with steps unveiled by the federal government on Friday to strengthen the corporate regulator's investigative powers and stiffen penalties, including doubling potential jail time for financial-services misconduct.

Over the last month, public hearings in a year-long judicial inquiry called by Canberra have heard a string of allegations and admissions of wrongdoing by financial firms, from pressure put on customers to borrow and fraudulent loan applications to fees charged for advise that wasn't received, including charges to dead clients that in one instance continued for more than a decade.

The royal-commission inquiry heard evidence this week that AMP allegedly lied to the Australian Securities and Investments Commission for years to cover a practice of charging customers for services they didn't receive. AMP issued an apology Friday over misconduct and its regulatory disclosure, and pledged improvements in culture and performance.

Mr. Meller, who had planned to retire by the end of the year, said he was "personally devastated" by the actions revealed in the inquiry.

"I do not condone them or the misleading statements made to ASIC. However, as they occurred during my tenure as CEO, I believe that stepping down as CEO is an appropriate measure to begin the work that needs to be done to restore public and regulatory trust in AMP," he said.

AMP said it would begin an immediate review of its regulatory reporting and governance processes, and make a submission to the inquiry responding to issues that had been raised.

According to testimony Monday from the corporate regulator, eight financial-services firms have since 2013 reported breaches where they charged customers a fee without providing regular advice. Those fees typically are about 2,000 Australian dollars (US$1,546) a year.

While Australia's banking and financial system is one of the strongest in the world, there are issues with behaviour and culture that need to be addressed, Treasurer Scott Morrison said, adding "punishment must always fit the crime."

To bring the country's penalties into line with other international jurisdictions and to ensure they act as a credible deterrent, the government said it would increase penalties for the most serious criminal offenses to a maximum 10 years imprisonment for individuals and the larger of A$9.45 million or 10% of annual revenue. For civil cases, courts would be able to impose penalties of up to A$1.05 million for individuals from A$200,000 previously and A$10.5 million for corporations, from A$1 million.

While the government needed to ensure it didn't commit economic self-harm to the economy in tightening regulation, the scale of penalties needed to send a clear message to the financial sector, Mr. Morrison said. "Jobs depend on confidence and trust in the financial and banking system."

As early as 2009, AMP told the regulator that there had been instances where it had mistakenly charged fees after customers stopped receiving advice. Evidence presented by the inquiry suggested the practice had been discussed by management and approved. Questioned this week by a lawyer for the probe, AMP's head of advice Anthony Regan conceded that AMP's failings were in some cases a deliberate decision by the company rather than a failure in process.

Mr. Meller, who began his career with Lloyds Banking Group PLC in the U.K., was appointed CEO of AMP in January 2014. He joined AMP's U.K. business in 2001 before coming to Australia the following year. AMP said he would be replaced on an acting basis by Mike Wilkins, a non executive director and a former CEO of Insurance Australia Group Ltd. (IAG.AU).

-Write to Robb M. Stewart at robb.stewart@wsj.com

(END) Dow Jones Newswires

April 20, 2018 01:29 ET (05:29 GMT)

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