AMP Limited Case Study: Key Issues And Development, Corporate Law Perspective And Regulatory Authorities

Summary of AMP Limited Case Study

1.

AMP Limited is an insurance company in Australia and New Zealand that is involved in the business of providing products related to investments and superannuation to it is customers and clients[1]. In addition to this, the said company is also engaged in providing finance and insurance-related advice to the clients. AMP Limited is a listed company that has it is shares listed on the Australian Stock Exchange (ASX). Recently, a class action has initiated against this company by the shareholders. Many of the newspaper and other media have published news related to this class action. In the give discussion, some key news reports are summarized which have covered this topic and captured the lead issues and developments.

On 18^th May 2018, a report has published on Website named “News” by a business reporter named David Chau. In this report, the issue related to class action raised by shareholders of AMP Limited has highlighted and in addition to this other aspect such as lawyers, their proceedings, and their fee related to class actions are also mentioned[2].

Another significant report has provided by Slater Gordon Lawyers on this topic. Although this report does not consist of so many facts about the subjective class action, however the same provides a brief of the issue and summarize the whole case in a general and understandable language. This report also stated what the case is all about. Further timeline of events and the topic named “who can register themselves to be a part of the proposed class action” is also a significant part of this report[3].

In addition to these two reports, many other reports have been published in various newspapers and websites that focused on identification of issues and developments related to class action in AMP Limited.

As stated earlier, AMP Limited (hereinafter referred to as a company) is an insurance and financial advisory company, the same has performed some unethical actions in this area. As per the findings of the case, during the period starts from the financial year 2006 to 2016, this company was engaged in charging certain fees for no service from it is clients in consideration to some personal finance advice[42]. This is necessary to state that such advice could not be provided to the clients, yet the company was doing the same. The company was charging this fee from clients under a policy which was approved by one of the management committees of the company as on 24^th May 2013. The approval was granted by the committee irrespective of the fact that allowing such policy can diminish the value and reputation of the company as the same will lead to some unethical and compliance issues. As the company was charging the fee from clients under a policy which was illegal and unethical, the same has furnished several fake statements with to Australian Securities and Investments Commission (ASIC) showing that the company is not charging any fee from clients for no service during the period 27 May 2015 to 3^rd May 2017.

Key News Reports on AMP Limited’s Potential Class Action

At last, in the month of April 2017 when the company has come to know that, the employees of the company are aware of the misconduct and a report named “Clayton Utz” to ASIC containing all the issues and fraud. Further, on 20^th April 2018, the company has communicated to the stock exchange and apologized for the misconduct. When this news went viral, share prices of the company fall down speedily and cause of the same, many of the investors faced loss as they had shares of the company.

The lead issue of this misconduct was the negative impact in prices of shares. This case is highly significant in the area of Corporate Law and conducts. In the case, the company has done many misconducts and therefore shareholders had to suffer who later on brought a class action against the company. This case gave a warning to every other company and also provided a learning that in the absence of an ethical practice, shareholders have the right to raise their voice.

2.                                                                                              

Before going ahead, to find and discuss the answer of query “why Banking Royal Commission was involved in the investigation of the case of AMP Limited,” this is necessary to know what Banking Royal Commission is. This is to mention that Banking Royal Commission (BRC) is an authority that has developed by the Australian Government to enquire the cases related to misconduct in banking, finance, and superannuation service industry in the year 2017[5]. The Banking Royal Commission has established under Royal Commissions Act 1902. Whenever there is a case related to misconduct in relevant industry i.e. banking and finance industry reports, then the RCB initiate the proceedings, find the issue and finally provides a report[6]. This report consists of every fact of the case and BRC in this report evaluate that whether a finance and banking institute did any misconduct or not.

This is also to mention that before preparing and providing any report, BRC follows a defined procedure of investigation and then after mention the result and finding of investigation in the said report. Before the establishment of BRC, many of the cases related to fraud in banking and finance sector have reported that were in against of the interest of clients of the business, so, for this reason, RCB has developed.

AMP Limited is also a company of the related industry; therefore, RCB was expected to work as a lead authority in case of misconduct in the company. When the issues related to misconduct, unethical practices have noticed, and the company itself apologized to the stock exchange, the RCB came ahead and initiated the investigation. Cause of misconduct of AMP Limited, many of the shareholders have suffered from economic loss, as this was a major issue related to misconduct, RCB, being a dedicated authority was involved in the investigation of the class actions in AMP Limited case.

Corporate Law’s Perspective on AMP Limited’s Case

In case of a company, many of the regulators and authorities are there to do the different tasks. Firstly, on every company in Australia, the lead legislation named the Corporations Act, 2001[7] is applicable. Under various sections of the act, there is a mention of ASIC. In cases of companies, ASIC is also a lead authority that controls the working of the companies in Australia. This is an authority, which works as a regulator in respect of corporates, markets, consumer credits, and financial services in the country. The lead motive of the ASIC is to ensure the fair practice in the market in addition to promotion of investor’s confidence and consumer trusts. As in the case of AMP Limited, this organization is a company and therefore ASIC could be a part of the investigation.

Further, in addition to being a company, AMP Limited is a listed company. In such a situation, the Australian Stock Exchange (ASX) is another authority that could be a part of the investigation held on the subject of “Class action by shareholders.” In cases of listed entities, ASX is the lead market regulator which ensure that no unfair practice would happen to the investors, therefore according to the studied case, ASX is also an applicable regulatory and could take the part in the investigation process of AMP Limited Class actions[8].

As in the studied case, the company has adopted unfair practices in respect of consumers and client, law related to Consumer Protection can also be applicable to the company as the same was also involved in the selling of finance and insurance products. Cause of application of this law, the local authorities could also involve in the investigation process. At the end, this is far significant to state that over and above of everything, judicial bodies such as high court and court of appeal has the powers to have look into the cases related to any legislation of the country and therefore could take a part in investigation of class actions initiated by the shareholders of the AMP Limited.

In this section, the focus is required to be made upon the fact that who was the person behind the fraud and misconduct of AMP Limited. As it is well known that a company is an artificial person, the same cannot act. Therefore, the director and officers of a company act on behalf of a company. As per the decision was given in the case of Salomon v A Salomon & Co Ltd[9], the directors can be held personally liable in cases of unfair practices and misconduct. In general, the directors, officers, and members cannot be held personally liable for the conducts of a company as there is an artificial veil exists between company and directors, which separates both of them. However, when a director or officer started taking unfair advantage of this veil, the court has all the power to pierce such artificial veil. As asked in the question that what are the possible remedies available in such kind of cases, therefore this can be stated that the court can make the guilty directors and officers liable for the misconducts.

Regulatory Authorities Involved in AMP Limited’s Case

This is also necessary to mention that under the Corporations Act, 2001 some general and specific duties are mentioned for the directors of the company. Every company in Australia needs to follow the provisions mentioned under corporations Act, 2001. Sections 180 to 183 of the Corporations are related to director’s duties. These are the sections, which attract civil provision i.e. in case of non- compliances of these sections, a director can be held liable for the civil penalty. Further,       Section 184 of the act also defines the director’s duty and this provision consists of the provisions related to criminal offenses[10]. In case of non- compliance of this section, a director, or officer of the company can be held liable for a criminal offense. Further, Section 206C of the act is also a significant section. According to the provisions of this section, a court can declare a director disqualify from being a director anymore on the application of ASIC, therefore this is also an option which is open in the cases where such kind of issues is involved[11].

In addition to this ASIC, also have some powers in the cases of misconduct and unfair practices by the companies. In those cases where the interest of shareholders or public at large is involved, ASIC can take actions. In such cases, ASIC process the received complaints within 28 days from the date of issues have come into knowledge[12]. As ASIC is a significant authority, the same has the power to take reasonable steps in against of guilty parties in order to prevent further misconducts. When there is a non-compliance of any of the section of the act, ASIC can take the actions against some acts and if find necessary the same can refer the matter specialist investigation[13].

In the cases of unfair practices adopted by directors or officers of the company, the victim parties can bring class actions. A class action is a kind of complaint or action that a group of person initiates together.  In addition to this, in such kind of issues where a company is a listed one, actions can also be taken by the concern stock exchange. Shareholders are the significant and valuable element of a company, therefore, it is the liability of the company to secure and protect their interest. In the case of unjustification with the same, judicial proceedings can also be initiated[14].

References

Books/Journals

Australia, Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC Act 2001, related regulations (CCH Australia Limited, 2011) 255.

International Monetary Fund, Australia: IOSCO Objectives and Principles of Securities Regulation—Detailed Assessment of Implementation (International Monetary Fund, 2012).

OECD, Corporate Governance The Role of Institutional Investors in Promoting Good Corporate Governance (OECD Publishing, 2011) 73.

Shane Reynolds, Get a Second Opinion Before You Sign: Lifting the Curtain on Lending Practices & the Australian Financial Services Industry (Archway Publishing, 2017).

Corporations Act, 2001 (Cth)

Salomon v A Salomon & Co Ltd. [1896] UKHL 1

ASIC, How ASIC deals with reports of misconduct (2018) < https://asic.gov.au/about-asic/contact-us/how-to-complain/how-asic-deals-with-reports-of-misconduct/>.

Beverley Newbold, Julia Avis and Rafael Aiolfi, Class/collective actions in Australia: overview (2018) <https://content.next.westlaw.com/Document/I085e949f360511e598dc8b09b4f043e0/View/FullText.html?contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1>.

Bloomberg, Company Overview of  AMP Limited (2018) < https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=882775>.

David Chau, AMP under siege from ‘record’ class actions, investors urged to wait for best deal (2018) <https://www.abc.net.au/news/2018-05-17/amp-under-siege-lawyers-class-action-shareholders-wait/9763940>

mauriceblackburn.com.au, AMP class action (2018) <https://www.mauriceblackburn.com.au/current-class-actions/amp-class-action/>.

Royal Commision, Home (2018) < https://financialservices.royalcommission.gov.au/Pages/default.aspx>.

Slater Gordon Lawyers, AMP Class Action (2018) <https://www.slatergordon.com.au/class-actions/current-class-actions/amp-class-action>.

[1] Bloomberg, Company Overview of  AMP Limited (2018) < https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=882775>.

[2] David Chau, AMP under siege from ‘record’ class actions, investors urged to wait for best deal (2018) <https://www.abc.net.au/news/2018-05-17/amp-under-siege-lawyers-class-action-shareholders-wait/9763940>

[3] Slater Gordon Lawyers, AMP Class Action (2018) <https://www.slatergordon.com.au/class-actions/current-class-actions/amp-class-action>.

[4] mauriceblackburn.com.au, AMP class action (2018) <https://www.mauriceblackburn.com.au/current-class-actions/amp-class-action/>.

[5] Royal Commision, Home (2018) < https://financialservices.royalcommission.gov.au/Pages/default.aspx>.

[6] Shane Reynolds, Get a Second Opinion Before You Sign: Lifting the Curtain on Lending Practices & the Australian Financial Services Industry (Archway Publishing, 2017).

[7] Corporations Act, 2001 (Cth)

[8] OECD, Corporate Governance The Role of Institutional Investors in Promoting Good Corporate Governance (OECD Publishing, 2011) 73.

[9] Salomon v A Salomon & Co Ltd. [1896] UKHL 1

[10] Austili, CORPORATIONS ACT 2001 – SECT 184 Good faith, use of position and use of information–criminal offences <https://www.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/ca2001172/s184.html>.

[11] Australia, Australian Corporations & Securities Legislation 2011: Corporations Act 2001, ASIC Act 2001, related regulations (CCH Australia Limited, 2011) 255.

[12] International Monetary Fund, Australia: IOSCO Objectives and Principles of Securities Regulation—Detailed Assessment of Implementation (International Monetary Fund, 2012).

[13] ASIC, How ASIC deals with reports of misconduct (2018) < https://asic.gov.au/about-asic/contact-us/how-to-complain/how-asic-deals-with-reports-of-misconduct/>.

[14] Beverley Newbold, Julia Avis and Rafael Aiolfi, Class/collective actions in Australia: overview (2018) <https://content.next.westlaw.com/Document/I085e949f360511e598dc8b09b4f043e0/View/FullText.html?contextData=(sc.Default)&transitionType=Default&firstPage=true&bhcp=1>.