The Federal Court has fined Mercer Financial Advice $12 million for wrongfully charging clients fees for services they did not receive and other breaches, including failure to provide fee disclosure statements. 

Justice Timothy McEvoy handed down his decision last week, in a civil penalty proceeding filed last year by the Australian Securities and Investments Commission (ASIC). 

ASIC had alleged the business, a part of US financial services giant Marsh & McLennan, made false or misleading representations to its customers about fees charged and services that were not provided, and for failing to provide fee disclosure statements. 

The court ruled the business breached sections of the Corporations Act and ASIC Act over a three-period from July 2016 to June 2019.

The breaches relate to Mercer charging 761 clients a combined total of more than $4.7 million in fees for services they did not receive and issuing over 3000 non-compliant fee disclosure statements to more than 2000 clients. 

Mercer also failed to provide fee disclosure statements to over 500 clients and failed to invite more than 800 clients to attend annual review meetings, despite those clients being entitled to attend. 

The court found that Mercer’s failures were caused by having inadequate systems and processes in place to ensure that its fee disclosure statements complied with financial services laws. 

Mercer was also found to have breached its obligation to provide financial services efficiently, honestly and fairly. 

“I have accepted that the contraventions in the present case were extremely serious. They were large in number, many clients were affected, large sums were involved, and they continued over a long period of time,” Justice McEvoy said in his ruling. 

“For whatever reasons the systems and processes which were in place did not prevent it…Mercer’s conduct is deserving of a stern penalty to achieve the objectives of specific and general deterrence in light of what has occurred.” 

However, he notes Mercer reported the relevant breaches at a very early stage and worked with ASIC in investigating them. The business has also made significant changes to its systems and processes and has “comprehensively remediated, with interest” to compensate affected clients. 

“It is in weighing all these matters…that I consider the pecuniary penalty of $12 million to be appropriate in the circumstances of this case,” Justice McEvoy said. 

ASIC Deputy Chair Sarah Court says the penalty is “significant” for a financial advice provider, although the fine is lower than the $20 million that ASIC had sought for the court to impose. 

“These failures occurred in part because Mercer failed to maintain the necessary systems and processes to ensure that the disclosure statements sent to customers were timely and accurate,” Ms Court said. 

“ASIC expects businesses to invest properly in their compliance systems. As [the] outcome shows, if they fail to do so, they face significant penalties.” 

Click here for the court ruling.