In documents filed at the Federal Court of Australia on 14 June, the Australian Securities and Investment Commission (Asic) alleges that former Westpac employee Sudhir Sinha provided inappropriate financial advice and failed to prioritise the interests of his clients.
Asic is contending that, since Westpac held the financial services licence used by Sinha, the bank is liable for the alleged breaches, which carries a maximum penalty of A$1m (£564,084, €642912, $753,089) per breach.
A civil approach
According to newspaper The Sydney Morning Herald, the move is significant as Asic has not previously sought civil penalties from a major licensee over similar breaches by individual advisers.
Asic has traditionally favoured court-enforceable undertakings, which direct banks to overhaul their internal processes.
177 clients impacted
Last year, Asic banned Sinha, who was employed by Westpac from 2001 to 2014, from providing financial services until June 2022.
The ban followed an Asic investigation where Westpac identified 177 clients that were charged fees by Sinha but did not receive any services from him.
Westpac said a “significant” remediation programme is underway in respect of Sinha’s conduct.
“Westpac has reported to Asic that, as at 14 June 2018, it has paid approximately A$12m in compensation to clients impacted by Mr Sinha’s poor advice and ongoing advice service failures,” an Asic spokesperson said.
Asic said the banning of Sinha was a result of its Wealth Management Project, which was established in October 2014 and focuses on the conduct of the country’s six largest advice firms.
Royal Commission
The action by Asic follows the Royal Commission into superannuation, banking and financial advice that has sent shock waves through the Australian advice industry.
Appearing before the commission, a now-former AMP executive admitted to lying to the regulator, while another collapsed under the pressure of appearing before the committee.
