Shares in newly-named Insignia Financial Ltd (ASX: IFL) – formerly IOOF Holdings – are edging higher today amid reports the Australian Securities and Investment Commission (ASIC) has commenced civil penalty proceedings against the firm.
ASIC is suing OnePath, the superannuation trustee under Insignia's banner, for allegedly charging inappropriate fees for no service whilst concurrently supplying false and misleading statements to members.
We've been down this path before, the path of fees for no service, as part of the Royal Commission into Banking and Financial Services in 2018. The outcomes weren't pretty for those involved in the reprehensible conduct.
Today, Insignia acknowledged that it recognised the action ASIC is taking against the company in a statement released before market open.
What's the deal here?
ASIC alleges that OnePath incorrectly charged its members over $4 million in fees without providing a service, moves that impacted over 18,000 individual accounts.
The company is not allowed to do this, and doing so is considered reprehensible conduct by the regulator – not less by its members, as well.
Deputy chair of ASIC, Sarah Court stated that "superannuation is important for the future financial security of Australians. Consumers must be able to trust they are being charged fees correctly by their superannuation providers. ASIC's case alleges that OnePath failed to do so in this case".
Specifically, ASIC's case submits that OnePath charged fees for financial advice to customers who had been disconnected from superannuation plans sponsored by their employers.
Apparently, as ASIC says, OnePath sent correspondence to its members until May last year, however, the letters failed to inform customers of their rights to terminate the fees, or any rights regarding the fees at all for that matter.
The regulator has it that OnePath made false statements regarding its right to continue charging these particular fees, thereby breaching its fiduciary duties as a financial services license holder.
In a statement today, Insignia noted that it and OnePath are carefully considering ASIC's action. It also noted that "separate to any question of liability", both OnePath and former owner ANZ are "remediating impacted members, with [OnePath's] remediation expected to be completed by the end of this month".
It remains committed to ensuring the identified plan service fee issues are appropriately resolved. The date for the first court hearing hasn't yet been scheduled.
At the time of writing, Insignia shares are swapping hands at $3.64 apiece, a small gain of around 1% on the day.
Insignia Financial share price snapshot
It's been a horrendous year for the Insignia share price, having slipped more than 1% into the red during the last 12 months.
This year to date, it has climbed a paltry 3% and has fallen back into the red by 7% over the past month.
Each of these returns has lagged the benchmark S&P/ASX 200 Index (ASX: XJO)'s return of around 10% in the last year.
