Australia's Federal Court has supported the Australian Securities and Investments Commission's argument that Westpac's sales practices contravened s912A(1)(a) Corporations Act, which the national financial regulator enforces among banks, but the regulator has failed to prove all the other points that it was making against the banking giant in its sweeping application for relief.

The case concerned Westpac's highly successful and lucrative campaign (2013-16) to persuade customers to 'rollover' their disparate pension pots into accounts at Westpac Securities Administration Ltd (WSAL) and BT Funds Management Ltd (BTFM), two subsidiaries of the Westpac group, which also includes BT Financial Group, the wealth management division. The campaign consisted of a mailout in which Westpac offered customers free searches for any superannuation accounts that they may might hold, followed by sales/marketing follow-up calls in which Westpac staff reiterated 'generic' messages which emphasised desirable features of the rollover service. By this means, the court said, Westpac successfully increased its funds under management by almost A$650 million (US$469 million).

ASIC, for the most part, contended that Westpac broke Australia's 'Future of Financial Advice' laws which oblige every financial firm that provides HNW/retail customers with "personal financial product advice" to act in those customers' best interests (subject to a 'reasonable steps' qualification) and divulge any conflict of interests such as volume-based payments and commissions for customer-facing staff. Its attempt to persaude the court to punish Westpac - which in the event escaped a fine - therefore hinged on whether the advice that the bank's staff offered was "personal" or not. In the 'FOFA' laws amended the Corporations Act in 2012 and tinkered with it in subsequent years.

ASIC contended that, notwithstanding Westpac's internal training which included guidance about the difference between general advice and personal advice, the bank's Super Activation Team staff were also in fact trained and encouraged to provide personal advice to customers. In doing so it pointed to a training document called the 'QM framework' or 'quality monitoring document' that Westpac circulated among its staff. ASIC argued that this scripture encouraged the team to provide advice to customers in a manner designed to use their personal circumstances to persuade them to roll over their external superannuation accounts into their BT accounts. The judge disagreed.

The court case analysed 15 telephone calls in which Westpac's staff discussed rollovers with its customers. In several cases, ASIC alleged that the customer in question had an objective "to ensure that [he or she] adopted an efficient and efficacious setup of [his/her] superannuation to ensure that [he/she is] receiving the greatest possible returns." Looking at the evidence, the judge did not accept that any customer expressed any such objective.

ASIC's case was that the Westpac caller in each call had "considered" the customer's "financial situation" as a person with one or more superannuation accounts when the call began (they all had several). Its first basis for saying this was the fact that each caller knew that the customer had more than one superannuation account when he or she made the call; in all but two cases, the caller knew information about other funds that the customer held and so, according to ASIC, was taking that into consideration when proffering the rollover service. The regulator also argued that the Westpac callers talked to the customers in accordance with the QM framework "whether they listened very carefully or not," which showed their consideration of the customers' various statements about their financial situations and needs.

The judge accepted neither proposition: "Mere knowledge of facts about customers...and an intention to persuade the customer to accept the rollover service does not support an inference that the caller engaged in any reflection upon the customer's position that amounted to 'consideration.'"

To sum up, the judge found that no personal advice had been given and therefore that there was no consequent failure to comply with ss946A or s961B Corporations Act or any breach of s912(1)(b) or s961K(2).