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4-Traders Homepage  >  Equities  >  AUSTRALIAN SECURITIES EXCHANGE LIMITED  >  Westpac Banking Corp    WBC   AU000000WBC1

WESTPAC BANKING CORP (WBC)
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Australian regulator sues Westpac for staffer's poor financial advice

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06/15/2018 | 03:04am EDT
FILE PHOTO: A woman walks past an illuminated logo for Australia's Westpac Bank in Sydney

SYDNEY (Reuters) - An Australian regulator filed a lawsuit against No. 2 lender Westpac Banking Corp over a financial planner it alleges gave poor advice for years, upping its scrutiny of a sector already under fire amid an embarrassing public inquiry.

Australia's A$5 billion (2.79 billion pounds) financial planning sector has provided some of the most damning evidence at an inquiry into finance sector misconduct, ordered by the government after a string of banking scandals including fraud.

Amid the backlash, the Australian Securities and Investments Commission (ASIC) on Friday said it filed a Federal Court lawsuit alleging that Westpac was liable for a financial planner in its employment failing to act in the best interests of customers, as well as for the planner's inappropriate financial advice and failure to prioritise the client interests.

Court documents made public by ASIC showed the regulator was seeking fines plus declarations the bank failed to do everything necessary to provide financial services "efficiently, honestly and fairly".

ASIC said the country's Corporations Act came with a maximum penalty of A$1 million ($746,400) for each wrongdoing, without specifying how many instances of wrongdoing its lawsuit alleged.

Westpac said it was reviewing the case and would cooperate with the regulator to resolve proceedings as soon as possible.

It said it identified compliance concerns with, and fired, the planner in question in 2014, then "proactively initiated remediation to identify and compensate affected customers".

The year-long inquiry into the financial sector, called a Royal Commission, has heard evidence of fraud and allegations of board-level misconduct since it began in February, including misleading a regulator about allowing financial planners to charge for advice without giving it.

The chairman, chief executive and several directors of the country's biggest wealth manager, AMP Ltd, have stood down over accusations of financial planner wrongdoing, while the country's third-largest lender, Australia and New Zealand Banking Group Ltd, has said it would stop paying planners bonuses for selling its products.

The former Westpac planner has not appeared at the Royal Commission. However, another parliamentary hearing in 2017 heard the planner charged 177 clients over six years without providing advice.

While the latest lawsuit stemmed from one former planner, the regulator said the bank breached part of the law "which requires Westpac to do all things necessary to ensure that the financial services covered by its licence are provided efficiently, honestly and fairly, and to comply with financial services laws".

The lawsuit is the regulator's second against Westpac in a year. Last month, the bank was cleared by a court of allegations levelled by ASIC that it rigged a key rate to boost profit.

Australian bank shares have been hammered by the Royal Commission, losing more than A$50 billion in market value since hearings began.

On Friday, Westpac shares closed 2 percent higher along with the broader market <.AXJO>, but are still down 11 percent since the inquiry started.

The regulator said the matter would have its first court hearing on July 19.

(Reporting by Byron Kaye and Paulina Duran; Editing by Stephen Coates and Christopher Cushing)

By Byron Kaye and Paulina Duran

Stocks mentioned in the article
ChangeLast1st jan.
AMP LIMITED 1.39% 3.65 End-of-day quote.-30.44%
AUSTRALIA AND NEW ZEALAND BANKING GROUP 2.74% 27.72 End-of-day quote.-6.12%
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Financials ( AUD)
Sales 2018 22 644 M
EBIT 2018 12 645 M
Net income 2018 8 483 M
Debt 2018 -
Yield 2018 6,73%
P/E ratio 2018 11,42
P/E ratio 2019 11,37
Capi. / Sales 2018 4,23x
Capi. / Sales 2019 4,12x
Capitalization 95 854 M
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Mean consensus OUTPERFORM
Number of Analysts 14
Average target price 32,0  AUD
Spread / Average Target 14%
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Managers
NameTitle
Brian Hartzer Chief Executive Officer, Executive Director & MD
Lindsay Philip Maxsted Chairman
Peter King Chief Financial Officer
David Curran Chief Information Officer
Robert Wilson Chief Technology Officer
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