SYDNEY–An Australian inquiry into misconduct in the financial sector claimed its first major scalp on Friday as the country’s largest wealth manager, AMP Ltd, announced its chief executive is stepping down after revelations of failures in its advice business.
At the same time, the government flagged increased penalties and longer prison terms for financial crimes in a bid to strengthen the enforcement powers of the corporate regulator following shocking revelations to the Royal Commission this week.
AMP executives admitted in testimony earlier this week that the bank had lied to the country’s corporate watchdog for almost a decade to cover its widespread practice of charging customers for services it did not provide.
AMP Chairman Catherine Brenner issued an unreserved apology for the company’s failures as she announced the immediate departure of CEO Craig Meller and an immediate review of the company’s regulatory reporting and governance processes.
“AMP apologizes unreservedly for the misconduct and failures in regulatory disclosures in our advice business,” Brenner said in a statement. “The board is determined that we will meet these challenges head on, accelerating changes in both culture and performance at AMP.”
Coverage of the Royal Commission, initially resisted by Australia’s center-right government, has dominated newspaper front pages, TV chat shows and talk-back radio across the country. Government data prepared for the inquiry shows over 80,000 consumers have been given bad advice over the past decade, costing them a total A$5 billion ($3.9 billion).
This week’s hearing has been particularly brutal for the banks and financial companies. A nurse gave tearful testimony on Thursday about losing her home after taking advice from Westpac Banking Corp, while lawyers presented evidence that Commonwealth Bank of Australia, the country’s biggest bank, knowingly charged dead clients for counsel for years.
Along with AMP’s behavior, the revelations prompted Treasurer Scott Morrison to raise the prospect of jail terms for the worst executive offenders.
The government is scheduled to detail new laws on Friday, including criminal penalties of up to 10 years in jail for breaches of corporate laws. Civil penalties for companies will carry fines of up to A$210 million. The corporate regulator will also have the power to intercept internal communications of companies if it deems it necessary.
“At the end of the Royal Commission process I would expect that there would be further areas of action that will become clear,” Finance Minister Mathias Cormann told Sky News from Washington, where he is attending a Commonwealth countries meeting.
The Royal Commission is just a couple of months into what is expected to be a year-long investigation.