Westpac To Pay Customers $87 Million After Withholding Corporate Action Information
Westpac has acknowledged its failure to notify approximately 32,000 customers of corporate actions between 2005 and 2019, leading to an estimated $87 million in compensation. Corporate actions are events initiated by public companies that bring changes to securities.
Westpac has committed to remediating roughly 32,000 customers whose financial advisors may have failed to notify them of corporate actions between 2005 and 2019. Westpac estimates approximately $87m will be paid in compensation to affected customers who are former clients of Westpac’s advice businesses and held ASX-listed securities through platforms.
Westpac’s advice to businesses that are involved in the remediation include the:
- Securitor Financial Group Limited;
- Magnitude Group Pty Ltd; and
- Westpac Banking Corporation, known as BT Financial Advice.
These businesses ceased providing personal financial advice in 2019.
What is Corporate Action?
A corporate action is an event initiated by a public company that brings or could bring, a change to the securities issued by the company. Examples of corporate actions include stock splits, dividends, mergers and acquisitions, rights issues, and spin-offs.
Why Weren’t Westpac Customers Notified?
Platform operators may appoint custodians to hold legal titles to customers’ listed securities. As the listed securities are not held in the customer’s name, communications about corporate actions from share registries do not go directly to the customer. When platform operators receive notifications of corporate actions in respect of those listed securities, depending on their specific arrangements, some operators pass on the notifications to the investor’s financial advisor or advice licensee.
Westpac first reported its failure to notify customers of corporate actions to the Australian Securities and Investments Commision, ASIC, in July 2019. They provided further information on the scale and significance of the issue in April 2020. On 14 April 2020, Westpac issued an ASX announcement that included provisions for corporate action remediation.
ASIC’s Corporate Action Recommendations
Danielle Press, the ASIC commissioner, said: “Compensating customers affected by misconduct is a very important part of licensees’ obligations to act fairly, honestly and efficiently.
ASIC has encouraged other licensees and platform providers to review their notification practices, and to “ensure customers, who are entitled to receive notifications of corporate actions, are notified appropriately”. Currently, only Westpac is paying for remediation. Though other financial advice providers, such as Morgans Financial, are encouraged to “consider their corporate action management arrangements”.
Who is Eligible for Westpac’s Remediation?
Westpac estimates there were approximately 328,000 potential missed corporate action notifications in the fourteen-year period. ASIC commented that “Westpac’s failure to notify customers of corporate actions means customers may have missed out on various opportunities.” They later commented that these opportunities included “purchasing additional shares often at a discount to the market price, the creation of temporary rights or options that can be sold for a profit, and the ability to sell shares and receive a benefit that can be tax advantageous depending on the shareholder’s circumstances”
You may be eligible for remediation if:
- Your shares were held in a wrap-style platform under a custodial arrangement where the corporate actions were only sent to the platform administrator
- This account had one of Westpac’s financial advisers listed as a nominated representative and they were part of the Magnitude or Securitor network or employed by Westpac as a BT financial adviser
- This account was opened during the review period
How Can I Get Compensated?
ASIC has noted it is a “complex remediation due to the various types of corporate actions involved”, however, Westpac aims to compensate most of their affected customers by the end of 2021. If you are a former client of Westpac’s advice businesses or have otherwise received poor financial advice from financial planners or accountants and you would like to discuss your experience, reach out to our expert team now.
We also encourage clients who use different platform providers to contact our team. These platforms could include:
- Morgans Financial Wealth+ Managed Portfolio Service
- Bell Potter Share Administration Service
- Ord Minnett Portfolio Administration & Reporting (SARS)
At FD Legal, we specialise in financial dispute law. Therefore, we have expert knowledge of both the Australian legal and financial sectors. We are committed to ensuring our clients receive the best possible advice and guidance on their situation, especially in financial matters. You may also call us at 1300 433 533 or email us at enquiry@fdlegal.com.au.
