The Federal Court has ordered Mercer Financial Advice (Australia) Pty Ltd to pay a $12 million penalty after being found to have failed in its fee disclosure obligations and charging fees to customers it was not entitled to charge.
ASIC Deputy Chair Sarah Court said, ‘This is a significant penalty for a financial advice provider. Mercer failed in its obligation to provide fee disclosure statements to clients, provided misleading information in the disclosure statements it did provide, and charged its clients fees for services it was not entitled to charge.
‘These failures occurred in part because Mercer failed to maintain the necessary systems and processes to ensure that the disclosure statements sent to customers were timely and accurate.
‘ASIC expects businesses to invest properly in their compliance systems. As today’s outcome shows, if they fail to do so, they face significant penalties,’ concluded Ms Court.
Mercer was found to have breached sections of both the Corporations Act and ASIC Act over a three-year period from 1 July 2016 to 30 June 2019 when it:
failed to invite more than 800 clients to attend annual review meetings, despite those clients being entitled to attend the meetings,
failed to provide fee disclosure statements to over 500 clients,
issued over 3000 non-compliant fee disclosure statements to more than 2000 clients, and
charged 761 clients a combined total of more than $4.7 million in fees for services clients did not receive.
The Court found that Mercer’s failures were caused by having inadequate systems and processes in place to ensure that its fee disclosure statements complied with financial services laws.
Mercer was also found to have breached its obligation to provide financial services efficiently, honestly and fairly.
Justice McEvoy noted in his judgment that the ‘contraventions in the present case were extremely serious. They were large in number, many clients were affected, large sums were involved, and they continued over a long period of time.
‘The community is entitled to expect that robust systems and processes will be put in place and maintained in the market for financial services to ensure that conduct of the kind which has occurred in this case does not occur.’
Mercer admitted to the misconduct.
