In a statement on Thursday, the corporate regulator said the Federal Court has ordered Mercer Financial Advice to pay the hefty fine having established that the firm failed in its fee disclosure obligations while also charging fees to customers it was not entitled to charge.
“This is a significant penalty for a financial advice provider,” said Australian Securities and Investments Commission (ASIC) deputy chair Sarah Court.
“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.”
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 3,000 non-compliant fee disclosure statements to more than 2,000 clients.
- Charged 761 clients a combined total of more than $4.7 million in fees for services clients did not receive.
According to Ms Court, the failures occurred in part because Mercer didn’t 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.”
The court also found that Mercer 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,” Justice McEvoy said.
“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.
