The Federal Court today fined AMP more than $5 million after financial planners engaged in insurance “rewriting” to boost commissions.

The court found AMP “failed to take reasonable steps” to ensure its planners complied with the best interests duty and related obligations under the Corporations Act.

During the trial the Australian Securities and Investments Commission (ASIC) alleged that a number of AMP financial planners took part in “rewriting conduct”.

This entails providing advice that results in the cancellation of the client’s existing insurance policies and taking out similar replacement policies by way of a new application, rather than through a transfer.

“By cancelling insurance policies and advising clients to submit new applications, clients were exposed to a number of significant risks and the planners received higher commissions than they would have by simply transferring the policies,” ASIC said in a statement today.

AMP had previously admitted the allegations, and the court noted today that the rewriting conduct by one of AMP’s financial planners, Rommel Panganiban, was “morally indefensible”.

“The court accepted ASIC’s case that, having become aware of Mr Panganiban’s conduct, it was necessary for AMP to ascertain the extent of breaches by other planners to meet its legal obligations,” ASIC said. “AMP failed to do so.”

The court found there were six contraventions of section 961L of the Corporations Act and imposed a penalty of $5.175 million.

It also indicated it will make orders requiring AMP to undertake a review and remediation program to ensure financial planning clients who were subject to rewriting conduct are detected and properly remediated, and that such conduct is prohibited in future.

“ASIC believes the penalty applied by the court today will act as a deterrent to AMP and other financial institutions to engage in such misconduct,” ASIC Deputy Chairman Daniel Crennan said.