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UPDATE 1-Australia's AMP back in inquiry hot seat as pension transfers challenged

Published 16/08/2018, 08:58 pm
Updated 16/08/2018, 09:00 pm
© Reuters.  UPDATE 1-Australia's AMP back in inquiry hot seat as pension transfers challenged

* AMP again at centre of financial-sector inquiry

* Exec says he cannot recall if payments were documented

* Cash investments put in risky credit instruments rated 'BBB-'

* Cash returns wiped out by fees on some AMP pension funds (Adds quotes from lawyer and AMP spokeswoman, details on fund fees, misrepresentation of cash investments, earlier hearings on ANZ)

By Paulina Duran

SYDNEY, Aug 16 (Reuters) - Australia's No.1 retirement and wealth management company AMP Ltd AMP.AX paid hundreds of millions of dollars from customers' retirement accounts to its subsidiaries without proper documentation, an inquiry heard on Thursday.

The disclosures are the latest blow to the once-venerable firm which could face criminal charges over misconduct earlier uncovered by the inquiry. AMP has lost almost 30 percent of its market value since the inquiry began in February. Allert, chairman of AMP Super, which by law must manage retirement savings in the best interests of customers, said under questioning that he was surprised to see internal company documents tabled at the inquiry saying the transfers were not legally documented.

Michael Hodge, a barrister assisting the commission, asked Allert whether as chairman of the trustee it "seems strange" that such payments would have been made "without any documented arrangement".

"I understood that those arrangements were documented," Allert replied.

"Did you ask any questions?" Hodge asked.

"I can't remember," Allert said.

The inquiry heard AMP Super had a small oversight team and Allert was not always involved in reviewing the performance of related funds.

He explained how AMP's pension fund business subcontracted four other companies - AMP Life, NMMT Ltd, AMP Services and AMP Capital - in a way that resulted in payments for services which were not fully disclosed to fund members.

Lawyer Suzanne Mackenzie, the former chair of the Superannuation Committee of the Law Council of Australia, told Reuters the hearing raised questions about whether the firm was meeting its legal obligations to act in the interests of members.

"They basically outsourced to other entities within AMP who don't have the same duty to members as the trustee has," she told Reuters.

"Assurance that the best interests duty is fulfilled therefore largely relies on adequate supervision of the other AMP entities and then being in a position to hold them to account.”

AMP spokeswoman Audrey Blackburn said the firm rejected any suggestion it had breached laws surrounding the management of pension trusts.

"There has been no such suggestion in the commission that AMP has contravened trust laws," she told Reuters.

While members' funds were being used to pay fees to AMP subsidiaries, members with AMP cash accounts were being charged fees that in some cases wiped out their returns, the commission heard.

Pressed by Hodge about why that would be the case, Allert responded: "They left the cash there knowing the return they're getting".

A confidential internal analysis showed the performance of several of AMP's pension products ranked near the bottom of the industry once fees and charges were included.

CASH INVESTMENTS

Documents presented at the inquiry showed AMP also had misrepresented as cash what were in fact investments in risky credit instruments rated as low as 'BBB-' by credit agencies, only one notch away from being called "junk" investments. The superannuation regulator is investigating this issue. year-long inquiry is currently examining the A$2.6 trillion ($1.89 trillion) retirement sector, having already exposed widespread wrongdoing in the banking and wealth management industries.

AMP posted its worst first-half net profit in 15 years on Aug. 8 as it set aside cash to compensate customers it had sold bad advice. While it has admitted wrongdoing on a large scale, it has denied criminal behaviour. previous hearings, the inquiry heard century-old AMP had charged clients for advice without providing it and had plotted at board level to conceal the practice from regulators. other developments on Thursday, the inquiry heard Australia and New Zealand Banking Group ANZ.AX sold over A$3 billion worth of complex pension products without proper advice to customers.

In July, the corporate regulator intervened to stop the practice. = 1.3755 Australian dollars)

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