Panganiban and Australian Securities and Investments Commission
[2017] AATA 1026
•4 July 2017
Panganiban and Australian Securities and Investments Commission [2017] AATA 1026 (4 July 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number(s): 2016/4060
Re:Rommel Panganiban
APPLICANT
AndAustralian Securities and Investments Commission
RESPONDENT
DECISION
Tribunal:Mr P W Taylor SC, Senior Member
Date:4 July 2017
Place:Sydney
The decision under review is affirmed.
.....................[sgd]...................................................
Mr P W Taylor SC, Senior Member
CATCHWORDS
TAXATION & COMMERCIAL – corporations law – permanent banning order prohibiting applicant from providing any financial services – whether applicant failed to comply with financial services law – applicant failed to comply with financial services law - whether the applicant was of ‘good fame and character’ – applicant not of ‘good fame and character’ – permanent ban warranted - decision under review affirmed
LEGISLATION
Corporations Act 2001 (Cth) ss 766B, 920A, 920B, 944A, 946A, 946AA, 946B, 946C, 961, 961A, 961B, 961C, 961D, 961E, 961F, 961G, 961J
CASES
Baharestan and Minister for Immigration and Citizenship [2011] AATA 420
Msumba and Department of Immigration and Multicultural Affairs [2000] AATA 87
Melbourne v The Queen (1999) 198 CLR 1
Minister for Immigration and Ethnic Affairs v Baker (1997) 73 FCR 187
Steele and Minister for Immigration and Multicultural Affairs [1997] AATA 405
Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422REASONS FOR DECISION
Mr P W Taylor SC, Senior Member
4 July 2017
Mr Panganiban is a qualified financial planner. Between 19 March 2010 and 12 September 2014 he was employed by Benidion Financial Services Pty Ltd (“Benidion”) and was an “authorised representative” of AMP Financial Planning Pty Ltd (“AMPFP”) - an Australian Financial Services (“AFS”) licensee. After leaving Benidion he became an authorised representative of another AFS licensee, Lionsgate Financial Group Pty Ltd and, until 3 August 2016, conducted his own financial planning business.
Lionsgate ended Mr Panganiban’s appointment as an authorised representative because of an order ASIC made on 1 August 2016 under the Corporations Act 2001 (“CorpAct”) ss 920A & 920B. The order prohibited Mr Panganiban from providing any financial services. Mr Panganiban applied to this Tribunal, on 3 August 2016, to review ASIC’s 1 August 2016 decision.
The August 2016 decision was primarily based on Mr Panganiban’s conduct in cancelling and replacing superannuation related insurance policies for a number of clients. AMPFP’s dissatisfaction about aspects of some of those transactions had led it to terminate Mr Panganiban’s representative status (formally on 15 September 2014), and later inform ASIC of its concerns (by letter dated 3 November 2014).
In its February 2015 response to a notice ASIC issued under CorpAct s 912C, AMPFP explained that prior to the September 2014 termination of Mr Panganiban’s authority it had identified 19 instances where, contrary to AMPFP’s guidelines, he had cancelled client’s insurance policies before relevant replacement policies came into effect. After 12 September 2014, AMPFP’s investigations identified other instances of cancellation and replacement involving new policy applications Mr Panganiban had submitted.
In a further response to ASIC on 16 July 2015 AMPFP said that its normal practice was to permit “policy conversion or transfer”, rather than have clients cancel and replace an existing policy. That normal practice avoided exposing clients to the risk of being uninsured - which would happen if there was a “gap” between cancellation of an existing policy and the replacement policy coming into effect. In support of its contention that policy transfer was available, AMPFP reported that, in about five instances, Mr Panganiban had arranged for policies to be “transferred” (rather than cancelled and replaced). AMPFP produced letters (variously dated between November 2014 and February 2015) addressed to other clients and informing them that their policies could have been transferred, and offering them the opportunity to have the contentious transaction reviewed to ensure it had not disadvantaged them.
AMPFP suggested that Mr Panganiban must have been fully aware of the “cancellation before replacement” sequence in all of the contentious transactions. There were four main reasons for that suggestion. The first related to concerns AMPFP had identified in early May 2013 about the practices involved in financial planners moving clients from one superannuation fund to another. AMPFP acknowledged that there was some potential benefit in moving clients into a “Flexible Super” fund with lower fees, but said this change did not require the cancellation of related personal insurance policies. After reviewing a sample of advice statements to clients, AMPFP queried with Benidion whether Mr Panganiban had adequately considered, and informed clients about, the possibility of “transferring” policies. The second reason related to the contents of the statements of advice Mr Panganiban provided to the clients involved in the contentious transactions. The third related to the additional commission entitlement associated with the issue of a “new” insurance policy. The fourth reason related to an admission attributed to Mr Panganiban in the notes of a 12 September 2014 meeting.
The first reason proved to be inconclusive. There was certainly evidence of AMPFP’s 2013 investigation, and its concern about both the cancellation and replacement of insurance policies, and the adequacy of the contents of the various client’s statements of advice. AMPFP appears to have raised those concerns with Benidion’s practice manager. But there is no record of any direct communications with, or complaint to, Mr Panganiban about the investigation. For his part, Mr Panganiban denied that any concern was ever conveyed to him personally - about either the cancellation and replacement of insurance policies or the contents of his statements of advice.
The second reason involved 26 instances where Mr Panganiban was said to have provided statements of advice provided to clients that did not contain any advice about replacement insurance. AMPFP said the omission was significant because the standard statement of advice template AMPFP used had an “embedded” section dealing with required advice and disclosures where a client was replacing an existing insurance policy. According to AMPFP, the absence of those disclosures was only explicable if Mr Panganiban had “chosen to remove the standard section” from the template when preparing the statements of advice provided to particular clients.
The third reason highlighted the additional commission payable where a “new” or “replacement” policy was issued - rather than an existing policy “transferred”. AMPFP had raised this matter in connection with the 2013 investigation. It informed ASIC that the contentious transactions it investigated in 2014 had resulted in additional commission entitlements. They totalled about $270,000 for Benidion, and about 40% of that total (approximately $108,000) had been reflected in additional payments to Mr Panganiban.
The fourth reason concerned the matters discussed at a meeting on 12 September 2014 at Benidion’s office. Three AMPFP representatives had gone to Benidion to discuss the situation with Benidion’s principal. At one stage during the day there was a meeting at which Mr Panganiban was also present. According to the notes of the meeting, one of the AMPFP officers asked Mr Panganiban (i) to explain why he had cancelled, rather than transferred, policies, (ii) whether he understood that cancellation before replacement was contrary to the best interests of the insured clients and (iii) whether the reason he had replaced policies was because it attracted a higher commission than transferring them. Mr Panganiban’s reported responses were that (i) the explanation for his behaviour was “stupidity and greed”, (ii) he understood the potential implications of cancelling policies and, (iii) he had cancelled policies before the replacement policies came into effect because “greed got to me” and he had acted out of “stupidity and greed”.
ASIC’S 1 AUGUST 2016 - PRINCIPAL FINDINGS
ASIC’s August 2016 decision reasons contained the following significant findings:-
(a) Mr Panganiban had advised about 49 named clients to cancel and replace existing insurance policies.
(b) In about 30 instances there were gaps (ranging from two days to about five months) between policy cancellation and replacement. In one case, the cancelled policy was never replaced.
(c) All the Statements of Advice Mr Panganiban provided to the relevant clients stated that policies should not be cancelled until any new policy came into effect. Despite that statement, Mr Panganiban consistently arranged for cancellations to be notified and implemented before replacement insurance had been obtained.
(d) The “gaps” between policy cancellation and replacement policy inception exposed those insurance clients to “obvious and…serious” risks.
(e) Additional risks associated with replacement policies included a potentially more restricted insurance entitlement for total and permanent disability. At least six insurance clients were subjected to other, less favourable, terms (including additional exclusions, premium loadings and reduced benefit entitlements) under the “replacement” insurance contracts.
(f) Only two clients were demonstrably financially advantaged by the cancellation and replacement of their existing insurance policies.
(g) The Statements of Advice Mr Panganiban provided to his insurance clients
(i) did not refer to the possibility of transferring, rather than cancelling existing insurance
(ii) in at least 22 cases, contained no advice about replacement insurance, no advice about the cancellation of existing insurance, and no advice that the clients would be uninsured between cancellation and replacement.
(h) Mr Panganiban knew it was possible to transfer an insurance policy, rather than to cancel a policy and replace it with a new insurance contract. He had made a specific concession to that effect at a Corp Act s 920A(2) private hearing on 1 March 2016.
(i) In advising clients to cancel and replace policies, rather than transfer them, Mr Panganiban had acted contrary to the client’s best interests and had given priority to his own personal financial benefit in obtaining an higher commission in relation to the replacement insurance contracts
(j) The 12 September 2014 note accurately recorded Mr Panganiban’s admission of “stupidity and greed”. That admission was truthful. Mr Panganiban’s later attempt to explain his statements, as something that Benidion’s principal had coaxed or coerced him into conceding, was not credible.
ASIC’s stance in the review proceedings, as articulated in its pre-hearing contention and submission documents, substantially adhered to the findings set out above.
SUMMARY OF THE CONTENTIOUS TRANSACTIONS
Relevant information about the contentious transaction derives from a range of different documents. They included (i) about 18 of Benidion’s client files - containing copies of the cancellation letters, and new insurance application forms, (ii) copies of the letters AMPFP had written to the clients whose insurance had been cancelled and, (iii) various spreadsheets prepared by AMPFP and ASIC summarising relevant details of the contentious client transactions.
During the course of the hearing, and in response to a Tribunal request, ASIC provided a further spreadsheet that attempted to collate into a single document the apparently material aspects of the contentious transactions. I have relied on that spreadsheet, and my own examination of the section 37 documents, to compile the information set out in the Schedule to these reasons. The Schedule excludes three clients (Kellett, Martin and Seenandan) whose details, as included in the ASIC spreadsheet, appeared anomalous and could not be confirmed from the available primary documents. The Schedule lists all of the other clients affected by the contentious cancellation and replacement transactions. It includes for each client the available details of (i) their superannuation fund membership, (ii) the nature of the insurance the client held before and after the “cancellation and replacement” transactions, and (iii) the dates of the respective cancellations, applications and replacement policies. The Schedule displays the information according to the date when each client’s policy cancellation became effective. In the last two columns of the Schedule, I have included (where meaningful calculation is possible) the number of days in any “gap” between policy cancellation and both the date of the client’s replacement policy application and the date that policy commenced.
I referred earlier to AMPFP’s complaint to ASIC that many of Mr Panganiban’s formal statements of advice to the clients did not include advice about the replacement of insurance, and its suggestion that this deficiency must have resulted from a deliberate decision by Mr Panganiban: see paragraph 8 above. In its 23 February 2015 response to ASIC, AMPFP speculated that the information might have been deleted because the clients “did not hold insurance at the time the advice was given”. The ASIC spreadsheet identified the client matters where the relevant advice was said to have been omitted. Column “P” in the Schedule reproduces that information.
One difficulty with AMPFP’s complaint is that its speculation, about the reason why the policy replacement advice was omitted, appears to have been unfounded. The information in the Schedule shows that the contentious insurance cancellations typically occurred after the date of Mr Panganiban’s Statement of Advice:- compare columns L and O in the Schedule.
Another difficulty with AMPFP’s response to ASIC is that it is not entirely clear what specific information was said to have been omitted from the Statements of Advice. In an attempt to clarify the precise content of the assertion I have read all of the available statements of advice. They are indicated by the entries in column Q in the Schedule. They included versions where, according to AMPFP’s assertion, the relevant advice was included, and also versions where it had been omitted:- compare columns P and Q in the Schedule. The Statements where AMPFP said there was advice about policy replacement, appeared to contain five relevant elements of advice. They were to the following effect:-
(a) Advice 1:- That clients would be uninsured after any cancellation of current insurance
(b) Advice 2:- That clients were likely to be subject to new / additional waiting or preclusion periods under any new insurance policy
(c) Advice 3:- That clients ought not cancel any current policy before a replacement policy came into effect
(d) Advice 4:- That the consequences of replacing current insurance were explained in a specific section of the statement of advice
(e) Advice 5:- That there were specific risks associated with the replacement of existing insurance. (Those risks were elaborated upon in a section of the statement headed “The consequences of replacing financial products”.)
Column Q in the Schedule sets out the result of my reading of the contents of each available Statement of Advice. Where the Statement contained advice to the effect I have summarised in the preceding paragraph, the corresponding numbers 1 to 5 appear in Column Q. Where any such advice element of advice is not contained in the Statement, I have substituted an “X” for the corresponding number. Comparison of the information in Columns P and Q shows that 16 of the 17 included at least one of advice elements 3, 4 and 5, and 12 of the 17 available Statements included advice element 5. This tends to suggest that there was typically either no apparent difference, or little material difference, between the various Statements of Advice. Consequently MPFP’s complaint about this particular aspect of Mr Panganiban’s Statements of Advice may have been overstated. On the other hand it is clear, and uncontroversial, that none of Mr Panganiban’s Statements of Advice to the clients contained any advice about either the potential transfer of insurance or of the fact that it would avoid all of the risks associated with a strategy of cancellation and replacement.
The doubtful accuracy of AMPFP’s complaints about the intentional omission of replacement product advice may have been contributed to by some variations in the sequence in which the various Statements of Advice addressed the particular topic of insurance replacement. However, neither the doubtful accuracy of that particular complaint, nor the speculative explanation for it, detracts from the propositions that can otherwise be drawn from the information summarised in the Schedule. Those propositions are to the following effect:- .
(f) There were about 46 contentious cancellation and replacement transactions from 2011 to 2014 (including 6 in 2011, 5 in 2012, 2 in 2013 and 31 in 2014)
(g) The insured clients included members of both AMP’s Flexible Lifetime super fund (about 9) and also members of its Flexible Super fund (about 33)
(h) The replacement policies included both Flexible Protection (“FP”) policies (at least 12 in total, including 1 in each of 2013 and 2014) and also Super Protection (“SP”) policies (at least 33 in total, including 1 in 2012, 1 in 2013 and 30 in 2014)
(i) Before February 2013 there does not appear to have been any “gap” between the various client’s policy cancellation and the start date of their replacement insurance.
(j) After February 2013, policy cancellations typically occurred before the commencement of client’s replacement policies. More particularly, after January 2014, there was a gap between policy cancellation and replacement in at least 26 of the 31 transactions. The gap ranged from 2 to 19 days. It was at least five days in 18 of the 26 instances.
MR PANGANIBAN’S CONTENTIONS
Mr Panganiban provided pre-hearing submissions, and with them, a very large number of documents, in January, March and April 2017. Much, and indeed most, of this material was directed at criticism of the contents of AMPFP’s complaint communications with ASIC, rather than disputing the accuracy of the factual findings made in the August 2016 decision, and those for which ASIC contended in the review proceedings. Nevertheless, the relevant parts of his submissions, as elaborated upon in his opening remarks at the hearing, involved the following principal contentions.
(k) The concerns AMP identified in its 2013 investigation, and had raised with Benidion, were never conveyed to Mr Panganiban. He had never been warned about his activities in relation to the replacement, as distinct from the transfer, of client’s insurance.
(l) The superannuation fund member clients could not have transferred their existing insurance - for three main reasons:- (i) only one insurance product was available within an individual client’s superannuation fund plan, (ii) the overwhelming majority of the contentious transactions involved the issue of a “Super Protection” policy. This was a new insurance product that was only introduced in March 2014 and, at the same time, the formerly available insurance product (“Flexible Protection”) was no longer available to any new superannuation fund members, (iii) until November 2015 AMPFP did not have any relevant application form for insurance policy transfers by members.
(m) Mr Panganiban had not been aware of any ability for clients to transfer policies. Although AMPFP had an apparently relevant 2014 policy document that summarised the permissible transfers, related commissions and application process (see paragraph 25 below) that was not a document he had seen until ASIC included it in the “section 37 documents” in the review proceedings.
(n) Mr Panganiban was not aware of any gaps between policy cancellation and the inception of new insurance - except perhaps in the case of one client who did not in fact obtain any new insurance. Apart from that matter, any gaps that did occur were unintentional, and a result of inadvertent supervision on his part.
(o) Mr Panganiban had not intentionally removed “embedded” disclosures about policy cancellation and replacement from his statements of advice to clients. On the contrary, the “template” software used to generate the statements required the replacement product advice option to be actively selected. Consequently, its occasional omission was inadvertent, rather than deliberate.
(p) At the September 2014 meeting Benidion’s principal had been anxious to convey to AMPFP that Mr Panganiban was solely responsible for the contentious transactions. Benidion’s principal had coerced him into the “stupidity and greed” admission recorded in the 12 September 2014 meeting notes. What he had said in the admission was wrong. He had never tried to “circumvent” the system for his own personal advantage. He had always acted in the clients best interests.
(q) His financial benefit from the “replacement” of policies was much less than the $108k claimed by AMPFP.
(r) All but six of the clients involved in the contentious cancellation and new policy transactions had benefitted by a reduction in the amount of their insurance premiums.
After the hearing Mr Panganiban provided a five page additional submission document. In that document, and relying on nine accompanying attachments consisting of various AMP guidelines, explanatory messages and forms, Mr Panganiban advanced contentions to the following effect.
(s) A May 2014 AMP document (entitled “Transferring cover across AMP personal insurance products - Part A - Eligibility to transfer”) proved that “due to product rules” an AMP client could not “transfer” existing Flexible Lifetime Protection (“FLP”) insurance into “the new Super Protection insurance structure within AMP Flexible Super”.
(t) Between March and September 2014, there was no AMP process allowing “systematic transfer” for AMP Flexible Super fund members from Flexible Lifetime Protection (“FLP”) insurance to “Super Protection” insurance.
(u) The only applicable form for an AMP super fund member wishing to move from FLP insurance to Super Protection was to apply for an AMP Flexible Super policy - using Replacement Policy Application - Super Protection (Form NS5411). That application form had not been issued until November 2015.
After receiving additional the submissions, I conveyed to Mr Panganiban and ASIC my preliminary view that the documents he had provided were either irrelevant or actually tended to contradict the submissions. I also outlined the reasons why I had formed that preliminary view. ASIC’s response agreed with my preliminary view. Mr Panganiban disagreed. He provided yet a further 4 page submission, and 27 pages of attachments. In that submission document Mr Panganiban adhered to each of the submissions summarised in paragraph 21. He appeared to add four other propositions. Those propositions were to the following effect:-
(v) Despite the May 2014 “Transferring cover” document, “internal transfers” (ie transfer of insurance policies within AMP Life and AMP Super) were permissible
(w) Flexible Lifetime Protection (“FLP”) was an insurance product “outside superannuation” Flexible Lifetime Super (“FLS”) was an AMP superannuation “platform”.
(x) A permissible “internal transfer” would include a transfer from FLS to FLP.
(y) But a transfer from FLP to FLS was not an internal transfer because “they are two different insurance products within AMP Flexible Super.”
PREVIOUS EXPLANATIONS BY MR PANGANIBAN
Mr Panganiban was represented by Senior Counsel at the March 2016 ASIC hearing referred to in paragraph 11(h) above. At the hearing Mr Panganiban gave evidence in chief, and was briefly cross examined by the ASIC delegate. Senior Counsel initially elicited from Mr Panganiban information about a number of client matters, and a concession that in some instances he had (he claimed inadvertently) omitted advice about replacement insurance. Then Senior Counsel directed Mr Panganiban to ASIC’s concerns that (i) he had adopted a practice of advising clients to cancel policies, rather than transfer them, (ii) he had done so in order to generate higher commissions, and (iii) in so doing he had prioritised his own personal financial interests. Senior Counsel then elicited evidence to the following effect from Mr Panganiban:-
(z)Prior to March 2014
(iii) Mr Panganiban knew that it was possible both to transfer policies and to cancel and replace them.
(iv) He had advised clients of the two possibilities, and of the difference between them.
(v) He had regarded the cancel and replace procedure as advantageous to clients, because he considered it would be “faster” to apply for a new policy than to attempt transfer.
(aa)After March 2014
(vi) No one told him whether it was possible to transfer FP (Flexible Protection) policies into the new SP (Super Protection) insurance.
(vii) He understood that underwriting requirements would apply to any application involving an increase in insurance benefits.
(viii) He would ensure that the existing policy remained in effect until he received confirmation that the new / replacement application had been accepted.
24.I referred earlier to the record of a 12 September 2014 meeting which attributed to Mr Panganiban an admission, to three AMPFP representatives, that his conduct in relation to the contentious transactions then under discussion had been motivated by “stupidity and greed”. Mr Panganiban was questioned about this statement by the delegate towards the end of the March 2016 ASIC hearing. The questioning was prompted by the contents of a statement Mr Panganiban had made on 29 February 2016 and provided to ASIC. In that statement Mr Panganiban had asserted that the Benidion principal had told him to make the “stupidity and greed” admission “if you wanted to make it go away”. He had claimed that he only made the admission because of that suggestion, and because he was distressed. The delegate’s questioning was directed at giving Mr Panganiban an opportunity to explain why he would have made such a statement if, as he asserted at the hearing, it was untrue. Mr Panganiban’s only explanation was that he had not been in the right (frame of mind) and that he was relying on the Benidion principal (whom he described as his mentor) to “help me with this”.
POSSIBILITY / IMPOSSIBILITY OF INSURANCE PRODUCT TRANSFER
The internal AMP correspondence in 2013 (see paragraph 7 above) clearly reflected an understanding that AMPFP permitted clients to “transfer” between insurance products. The possibility of transfer was explicitly stated in the 2014 AMPFP policy document to which I alluded earlier:- see paragraph 2020(m) above. The document is not precisely dated, but it must have come into circulation in about March 2014. (The necessity arises because it addresses “transfer” to the Super Protection policy that was a “new personal insurance module” AMP introduced on 3 March 2014.) The “insurance transfers” document contains the following significant information:-
(bb) a declaration that its purpose was “to summarise the commission payable when transferring cover between AMP insurance products”;
(cc) the explanation that “transfer” meant “the replacement of existing cover within a like product, with no underwriting”;
(dd) specific identification of two material superannuation fund insurance products from which superannuation fund members could transfer - namely (i) AMP Flexible Super - Super Protection (“AFS-SP”) and (ii) AMP Flexible Super - Flexible Protection (“AFS-FP”);
(ee) the particular insurance products to which fund members could transfer:- namely
(ix) AFS-SP insureds:- to (a) AFS-FP, or (b) either Flexible Lifetime - Super (“FLS”) or (c) Flexible Lifetime - Protection (“FLP”)
(x) AFS_FP insureds:- to (a) AFS-SP, or (b) either FLS or FLP;
(ff) stipulations about the particular kinds of “transfer” that would attract a commission entitlement, and the nature of that entitlement
(gg) the procedure for effecting an insurance product transfer was to fill in a new application “for the ‘destination’ product” and ensure that “the appropriate transfer / conversion section is completed”.
The application form contemplated by the March 2014 “insurance transfer” document appears to have been a specific AMPFP Form - no 904834 “Changing your insurance arrangements”. There were two versions of the form:- (i) from August 2012 to January 2014, and (ii) after February 2014. The former dealt with variations to FLS and AFS-FP policies. The latter dealt with those policies and also AFS-SP policies. Apart from that difference, the two versions of the “Changing your insurance arrangements” form had common features - particularly the following:-
(hh) Question 4:- a specific enquiry about whether the fund member was “eligible for a transfer of insurance benefits from another AMP plan” - and an invitation to telephone a particular number to enquire about transfer eligibility.
(ii) Question 5:- a question about whether the member had any personal insurance “other than this application”.
(jj) Question 7:- specifically addressed the contingency that the applicant member might be “transferring insurance cover” from another AMP plan, and required an acknowledgment that the existing plan cover would end when the additional insurance benefit application was accepted.
The combined effect of the March 2014 policy document and the “Changing your insurance arrangements” form is to demonstrate that, from at least August 2012 onwards, AMPFP had an established practice and procedure for effecting “transfer” between insurance products. Even more significantly, by March 2014 both documents explicitly contemplated that a member of the AMP Flexible Super superannuation fund could hold either an AFS-FP insurance policy, an AFS-SP policy, or an FLP policy. Those propositions are consistent with the contents of AMPFP’s July 2015 response to ASIC’s s 912C notice. That response contained statements that-
(kk)all of the insurance policies involved in the contentious transactions could have been converted or internally transferred, rather than cancelled and replaced.
(ll)the commission payable in relation to any converted or internally transferred insurance cover, would have been limited to (i) any ongoing commission for the “transferred” cover, and (ii) up-front (and ongoing) commission for any increased insured amounts.
In addition, the documents Mr Panganiban proffered with the first version of his post hearing submissions tended to contradict, rather than to support, his contentions about the impermissibility of policy transfer at the time of the contentious transactions. That proposition comes from the following aspects of the documents.
(mm)The May 2014 “transferring cover” document (see paragraph 2121(s) above) declared that it set out guidelines for “transfers” between personal insurance products offered by (i) AMP Superannuation Ltd, (ii) AMP Life Ltd, (iii) The National Mutual Life Association of Australia Ltd (“NMLA”) and (iv) NM Superannuation Pty Ltd. None of the contentious transactions contemplated those kinds of transfers. The transactions all involved “internal” transfers - between products offered by the same insurer. The terms of the May 2014 transfer document simply did not apply to these kinds of transfer. Indeed, the document specifically stated that it did not affect other insurance product transfers. Even more significantly, the document declared that “existing guidelines and commission arrangements for internal transfers … will continue to apply”. One of the specific examples the document gave for “internal transfers” was from FLS to FLP.
(nn)One of the documents was a completed version of a “transfer” form that in fact had come into effect in May 2014. It had been completed by Benidion’s principal in March 2015. The existence of such a transfer form in May 2014, and its use in March 2015, appears to contradict the proposition that there was no relevant transfer form at the times relevant to the contentious conduct.
The propositions Mr Panganiban proffered in his second set of post hearing submissions (see paragraph 22 above) were inconsistent with other evidence, specious and internally inconsistent. Mr Panganiban’s first point seemed to be that all the contentious transactions involved clients who had existing FLP insurance. This was inconsistent with (i) the “FP” insurance identified in the information AMPFP had provided to ASIC - and recorded in column G in the Schedule, (ii) the contents of each of the available cancellation letters, (iii) fact that in his March 2016 hearing evidence Mr Panganiban had expressly directed his evidence at “FP” insurance (and had not mentioned FLP insurance. Mr Panganiban’s second point seemed to be that FLP insurance was an insurance product “outside superannuation” (and that this was somehow relevant to the permissibility of transfer). But another part of the same submission appeared to contradict that proposition, and to identify FLP insurance as one of “two different insurance products within AMP Flexible Super”:- see paragraph 22(y) above. Furthermore, in his cross examination evidence Mr Panganiban had explicitly identified FLP as an “insurance product within the Flexible Super” fund, and the contents of the March 2014 “Insurance transfers” document confirmed the accuracy of that evidence:- see paragraph 25 above. Mr Panganiban’s third point seemed to be that a transfer from an AMP “superannuation platform” to an AMP insurance policy would be a permissible “internal transfer” but that a transfer in the reverse direction would not be permissible. Neither logic nor the contents of any AMP policy documents provided a basis for that proposition. Indeed the possibility of transfer from either FLP or FP to any of the other superannuation funds or policies relevant to the present proceedings, was expressly recognised in the March 2014 “Insurance transfers” document.
FINDINGS IN RELATION MR PANGANIBAN’S “TRANSFER” KNOWLEDGE
Mr Panganiban conceded at the March 2016 hearing that he knew about the possibility of insurance transfer prior to March 2014. When asked about his understanding of the possibility of “FP to SP” transfer after March 2014, Mr Panganiban had not directly answered that question, but had merely claimed that no one had told him that transfer was possible.
A generous reading of Mr Panganiban’s March 2016 evidence might interpret his evidence about not being told as involving a positive assertion that he was in fact unaware of the possibility of transfer. I am comfortably satisfied that no such generosity should be extended to Mr Panganiban. He was, at all times, well aware of the possibility of transfer. He knowingly and repeatedly eschewed its use. Foremost in the reasons for my satisfaction is the admission Mr Panganiban made at the 12 September 2014 meeting. There is a glaring inconsistency between the admissions Mr Panganiban then made, and his subsequent assertions - in March 2016 that he had not been told transfer was possible and, in his submissions in the present proceedings, that no transfer was in fact possible. If either of Mr Panganiban’s subsequent assertions had been true - in the sense that they reflected Mr Panganiban’s contemporaneous understanding at the time of the contentious transactions - he would have proffered them when he was asked for an explanation at the 12 September 2014 meeting. It would be credulous to reach any other conclusion.
It would be similarly credulous to accept Mr Panganiban’s claim that his mentor at Benidion coaxed, coerced or influenced him to admit to being motivated by greed and stupidity, as a means of deflecting AMPFP’s concerns. As Mr Panganiban would have it, his actions in relation to the contentious transactions were ones where he was unaware of, and had never been told about, the possibility of insurance policy transfer, and had always acted in his client’s best interests. There is no sense or credibility in his assertion that nevertheless, he admitted having been motivated by “stupidity and greed”. There is even less sense in his explanation that he thought such an untrue admission would deflect criticism of him, or ameliorate the potential consequences of his conduct. It is far more likely, and I find, that Mr Panganiban’s September 2014 admission of stupidity and greed was a candid and reliable acknowledgement of the reality of his conduct.
My reasons for finding that Mr Panganiban was at all times aware of the possibility of policy transfer, and that he self-interestedly adopted the alternative practice of policy cancellation and replacement, are by no means confined to what he said at the 12 September 2014 meeting. Another reason derives from the content of the “Changing your insurance arrangements” form. That was the form that Mr Panganiban appears to have used to apply for replacement policies in all the contentious transactions. It contained a specific section on “transfer or conversion”, and invited enquiry about transfer eligibility. That context suggests that AMPFP had an established policy on the permissibility of transfer. And the suggestion is corroborated by the contents of the March 2014 “Insurance transfers” document:- see paragraph 25 above.
Mr Panganiban’s repeated use of the “change” document, understood against the background of the March 2014 policy document, tends to contradict both his March 2016 evidence that no-one told him about the possibility of transfer (after March 2014) and his submission (in the present proceedings) that there was no relevant transfer mechanism at the time of the contentious transactions. According to the contents of the available versions of the completed “Changing your insurance arrangements” forms, Mr Panganiban always provided, or assisted clients to provide, “No” answers to Questions 4 and 5 in the form. (The italicised dates in column W in the Schedule refer to the available completed forms, and the instances where they contain the “No” answers. As column W shows, all the available completed forms were answered in that fashion.)
The fact that Mr Panganiban consistently answered the transfer question suggests that he was in fact aware of the transfer possibility. That suggestion is corroborated by the information that, in a number of instances, he had in fact arranged for the transfer of client insurance:- see paragraph 5 above. It is further corroborated by the circumstances involved in one of the contentious transactions. In his January 2017 submissions Mr Panganiban cited an email exchange in June 2014 with an AMP customer service officer about a “problem” in transferring a particular client’s policy. Although Mr Panganiban suggested this communication supported his contention that “transfer” was not possible, it actually points to the contrary conclusion. This is because the “problem” identified in the particular correspondence (i) related to the limitations of the AMPFP computer system, (ii) was reported as one that was to be the subject of a software “fix” and (iii) did not address, or dispute, the underlying permissibility of the policy “transfer”. Mr Panganiban ultimately conceded, in the course of his oral evidence, that the problem he claimed to have perceived with “transfer” of policies after March 2014 was about the practicalities of the process, rather than its permissibility.
If Mr Panganiban had not been self-interestedly pursuing additional remuneration associated with replacement insurance policies, there would have been no reason for him to have disavowed the existence of other insurance in the completed “Changing your insurance arrangements” forms. Furthermore, he would have ensured that clients complied with the advice contained in his Statements of Advice - that no existing insurance was cancelled until the replacement policy came into effect:- see paragraph 17(c) above. Indeed, Mr Panganiban’s March 2016 evidence was adamant that his usual practice was to defer cancellation until after he received underwriting confirmation that the replacement insurance had been accepted:- see paragraph above.
If that assertion had been true, it should have meant that no clients would be likely to have cancelled their existing insurance before they were aware of the commencement and the terms of their replacement insurance. They could then have made an informed choice as to which policy to proceed with. That potential might have ameliorated concern about the absence of specific replacement policy advice in Mr Panganiban’s Statements of Advice.
But the objective circumstances clearly contradict Mr Panganiban’s claims, and show that he repeatedly acted contrary to the contents of his own formal Statements of Advice in cancelling existing policies before any replacement insurance came into effect. Columns J, K, L, W and X in the Schedule list the respective dates (where they can be discerned in the available evidence) of the client’s cancellation authority, the date Mr Panganiban provided it to AMPFP, the date the cancellation took effect, the date Mr Panganiban submitted the “Changing your insurance arrangements” forms, and the date the replacement policy took effect. The comparison reveals that Mr Panganiban typically submitted the client’s cancellations before he even submitted the replacement policy application. Columns AC and AD in the Schedule indicate the typical existence of a substantial delay between cancellation and replacement policy commencement. The totality of this information is quite inconsistent with Mr Panganiban’s March 2016 evidence, and with his assertion in the present proceedings that any such “gap” was merely inadvertent.
The available information is tellingly probative of an intentional and consistent practice of cancellation before replacement, and of the underlying motivation of preferential self-interest. It is clear that Mr Panganiban intentionally involved clients in a cancellation and replacement sequence of events that necessarily exposed them to the risk of a “gap” between the two events, and to both the risk of being uninsured, and the risk of resetting waiting or exclusion periods from the date of the “replacement” policy.
CORPORATIONS ACT - PROVISIONS RELATING TO FINANCIAL SERVICES
The statutory scheme relevant to review of ASIC’s 1 August 2016 decision is relevantly set out in CorpAct Chapter 7 - Financial services and markets and, more particularly in Parts 7.1 & 7.6 to 7.9. Those latter parts contain detailed provisions governing the supply of financial services, including financial product advice. The general objectives of the Chapter are set out in s 760A, in the following terms:
760A Object of Chapter
The main object of this Chapter is to promote:
(a) confident and informed decision making by consumers of financial products and services while facilitating efficiency, flexibility and innovation in the provision of those products and services; and
(b) fairness, honesty and professionalism by those who provide financial services; and
(c) fair, orderly and transparent markets for financial products; and
(d) the reduction of systemic risk and the provision of fair and effective services by clearing and settlement facilities.
The CorpAct Chapter 7 provisions of principal relevance to the circumstances of the present application are:-
the general obligation of licensees and authorised representatives to provide retail clients with a formal “Statement of Advice” when they provide “personal advice” to a client:- CorpAct ss 944A-946C (A person gives “personal advice” when their advice considers (or where a reasonable person might expect the adviser to have considered) the recipient’s “objectives, financial situation and needs”: see CorpAct ss 766B(3) & (4));
(b)the statutory obligation of a person who provides “personal” financial product advice to act in the client’s best interests - including making “reasonable inquiries” and conducting “reasonable investigations” - and to provide only appropriate advice to the client:- CorpAct ss 961-961E and 961G;
(c)the statutory obligation of a person who provides “personal” financial product advice to give priority to the client’s interests, whenever they conflict with those of the advice provider:- see CorpAct s 961J;
(d)ASIC’s ability to ban a person from providing financial services where (amongst other things) the person becomes insolvent, incurs a conviction for fraud, fails to comply with a financial services law, or is involved in another person’s failure to comply: see CorpAct s 920A(1);
(e)ASIC’s ability to ban such a person from providing financial services where it has reason to believe the person is not of good fame or character, is not adequately trained and competent, or is likely to fail to comply with financial services laws: see CorpAct s 920A(1);
(f)the declaration that “financial services laws” relevantly includes duties “even if the provision imposing the duty is not an offence provision or a civil penalty provision”:- CorpAct s 920A(1B);
(g)the provision that requires a permanent ban where ASIC has reason to believe that a person is not “of good fame or character”:- see CorpAct s 920B(2).
The findings I have made are that Mr Panganiban deliberately and repeatedly failed to act in his clients best interests, and pursued a practice of policy cancellation and replacement, rather than transfer, motivated by his own financial self-interest. Such was his self-interest that he consistently defied the contents of his own Statements of Advice and acted contrary to the best interests of his clients. Mr Panganiban has clearly failed to comply with financial services law. They also call into question his good character.
THE CONCEPT OF GOOD CHARACTER
The concept of “good character” refers to a person’s “enduring moral qualities”. This conceptual association was recognised in Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 and in Melbourne v The Queen (1999) 198 CLR 1 at [33]. The former case addressed the term “good character” in the context of s 501(6)(2) of the Migration Act 1958 (Cth). In that context “character” referred to a person’s actual moral qualities, rather than to their reputation - ie their “good fame”: Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 at 425 (per Davies J) and 431-432 (per Lee J). There are no precise parameters to permit definitive distinction between “good” and “bad” character: Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 at 428A per Davies J. In assessing character regard may be had to a range of considerations, including
(h) the particular the person’s history of general respect for and compliance with the law
(i) the person’s evident honesty, particularly in their dealings with authorities, dependents, and others who rely on them for advice and assistance
(j) the person’s apparent ability to distinguish between proper and improper conduct, and act accordingly
(k) the nature and extent of the conduct that has called the person’s character into question.
Character findings made in a forensic setting are rarely informed by expert psychological assessment but are instead primarily matters of impressionistic inference derived from evidence of a person’s actual conduct: Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 at 425C; Steele and Minister for Immigration and Multicultural Affairs [1997] AATA 405. The practical difficulty of a forensic character assessment based wholly on evidence of actual objective conduct, makes it inevitable that evidence of a person’s reputation, in the sense of the repute with which they are regarded by friends, colleagues and associates, will often be admissible not only as a permissible, but also as a potentially reliable, basis for an inference about the nature of their character: Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 at 425 (per Davies J). And where, as in the case of Corp Act 920A(1) & (1A) “good fame” is a relevant criterion, a person’s reputation will necessarily be material. The appropriateness of the inference of “good” character or “repute” in any particular case will necessarily depend on satisfaction that the repute is based on accurate awareness of, and a sound capacity to evaluate, the person’s conduct and particularly the conduct that has been impugned.
Whatever the source of the information on which it is based, the assessment of a person’s character involves a conclusion about the person’s relevant qualities and capacities: Irving v Minister for Immigration, Local Government and Ethnic Affairs (1996) 68 FCR 422 at 431G; Msumba and Department of Immigration and Multicultural Affairs [2000] AATA 87 at [37]. It is not merely an opinion about the quality of their conduct in relation to particular acts or omissions: Minister for Immigration and Ethnic Affairs v Baker (1997) 73 FCR 187 at 194. Consequently, past conduct deficiencies do not preclude a finding of current good character. Past conduct may not materially inform a character assessment if it is isolated and aberrant, in terms of the person’s intrinsic qualities and likely behaviour: see eg Baharestan and Minister for Immigration and Citizenship [2011] AATA 420 (single offence was an 18 year old manslaughter conviction). On the other hand, because the assessment of character is concerned with intrinsic qualities and capacities, it is not confined to consideration of a person’s usual or prevalent behaviour. Episodic, and even isolated, episodes of misconduct may, depending on their particular circumstances, provide telling objective evidence that a person is not of “good character”: Minister for Immigration and Ethnic Affairs v Baker (1997) 73 FCR 187 at 195. But satisfaction that a person was not of good character at some past point in time does not preclude satisfaction of their contemporary good character. Much will depend on the quality of the past conduct, and the contemporary circumstances.
CHARACTER FINDINGS
Mr Panganiban provided some evidence of his technical competence, and his good relationship with his clients. Indeed, despite various criticisms identified in ASIC’s 1 August 2016 reasons, and the review program AMPP had instigated with the relevant clients (see paragraph 5 above) it was common ground that no client had expressed dissatisfaction with Mr Panganiban’s services.
Nevertheless, Mr Panganiban’s conduct (as I have characterised it in paragraphs 39 and 42 above) demonstrates that there is reason to believe he is not a person of good character. This was a conclusion he determinedly contested. But his contest involved an incredible denial of his September 2014 admission of culpability, specious assertions about the impossibility of insurance transfer, and similarly specious assertions that any “gap” between policy cancellation and replacement policy commencement was merely inadvertent. His disavowal of his September 2014 admission, and his specious arguments demonstrate that, at the least, he lacks contemporary insight into the gravity of his past conduct and of the extent to which he failed to act in his client’s best interests.
Mr Panganiban’s past conduct evidences a serious character failing, and is not consistent with good character. His contemporary lack of insight into the nature and extent of his culpability in relation to that past conduct, precludes positive satisfaction of his contemporary good character. The quality of his past misconduct, and his absence of contemporary insight, provide reason to believe that he is not a person of good character.
DECISION
An absence of satisfaction of a person’s contemporary good character provides a good, indeed a compelling reason - having regard to the general objectives of Corp Act Chapter 7 (see paragraph 40 above) to exercise the banning order discretion.
The decision under review is affirmed.
Schedule 1: Cancellation and replacement transactions – cancellation date order
51. I certify that the preceding 50 (fifty) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member
52.
.....................[sgd]...................................................
Dated: 4 July 2017 4 July 2017
Date(s) of hearing: Applicant:
Counsel for the Respondent:
Solicitors for the Respondent:In person
Ms R Graycar
Mr N Goodstone, ASIC
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