An overview of the recent decision against Westpac Securities Administration Limited
Westpac Securities Administration Ltd (Westpac) and BT Funds Management Ltd (BT) implemented campaigns in writing and by telephone in 2014 and 2015 to encourage their customers to roll over external superannuation accounts into existing accounts (collectively, the BT accounts) that they held with Westpac and BT.
ASIC’s argued that they were providing personal advice in the calls and breached a number of associated provisions e.g. best interest duty and the general licensing condition in section 912A(1)(a) to do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly.
Westpac and BT contended that no advice or only general advice was provided and succeeded at first instance on this point. ASIC appealed.
On appeal, the Federal Court in Australian Securities and Investment Commission v Westpac Securities Administration Limited  FCAFC 187 found that personal advice was provided.
The court concluded that in the circumstances, a reasonable person standing in the shoes of the customers might expect the callers to have considered one or more of the person’s objectives, financial situation and needs in making the recommendation. Reasons for this included:
This was found to be the case notwithstanding the following three factors, which could have gone towards supporting a contrary view:
The court also considered that the efficient, honest and fair general licensing condition had been breached. Of interest to many will be the view expressed [our italics] that “It could hardly be seen to be fair, or to be providing financial product advice fairly, or efficiently, honestly and fairly, to set out for one’s own interests to seek to influence a customer to make a decision on advice of a general character when such decision can only prudently be made having regard to information personal to the customer. For one’s own interests, one is advising generally (on this hypothesis) to bring about a result which may not be in the interests of the customer. The general advice is given to reinforce an assumption that fewer fees (in number) will mean less fees (in amount). There was a degree of calculated sharpness about the practice adopted in the QM Framework”.
Chief Justice Allsop also noted that perhaps Westpac could have avoided the above conclusion and result by the callers ensuring that the customers had the opportunity to consider their own positions and, having done so, later communicate an acceptance, if they wished. This was, however, not the intended model of the engagement. “Closing” was to take place, if at all possible, on the call over the phone.”
As a result of this decision, the insurance industry (insurers, their agents and insurance brokers) need to review any current general advice models, materials and procedures in place to consider whether the issues raised in this case give rise to a personal advice and unfairness risk.