(Bloomberg) -- AMP Ltd. Chief Executive Officer Craig Meller stepped down, the first scalp claimed by Australia’s inquiry into misconduct in the financial industry, which this week heard the wealth manager deliberately misled regulators over charging customers for services they didn’t receive.
“I am personally devastated by the issues which have been raised publicly this week, particularly by the impact they have had on our customers, employees, planners and shareholders,” Meller said in a statement Friday. “This is not the AMP I know and these are not the actions our customers should expect from the company.”
The move brought forward Meller’s planned departure and could presage a wider boardroom cleanout at the 169-year-old firm as the fallout from the inquiry spreads. The Sydney-based company said it will undertake an “immediate, comprehensive” review of its regulatory reporting and governance processes, while a board committee will review issues related to the advice business raised in the inquiry.
“There are wider questions here about AMP, it’s not just its reputation that’s tainted now,” said David Walker, a Sydney-based money manager at Clime Asset Management. This scandal “could impact their inflows which have already been struggling,” said Walker, whose fund doesn’t hold shares in AMP.
AMP shares erased an earlier gain to fall to the lowest in more than four years in Sydney trading, and traded at A$4.32 at 1:29 p.m. local time. The stock slumped more than 10 percent this week as the inquiry heard the company lied to the Australian Securities & Investments Commission about charging customers for services they didn’t receive, and presented the regulator with an “independent” report that included numerous changes by the chairman and executives.
The shares could fall as low as A$4, Shaw & Partners analyst Brett Le Mesurier said in a report, recommending investors sell the stock.
“The time to move is now,” Le Mesurier said, flagging “collateral damage” from the inquiry. “A management shake-up is coming and it may extend to the board.”
Among other steps announced today, AMP said:
- Former IAG Ltd. CEO Mike Wilkins will be acting CEO until a replacement is found
- A retired judge will oversee the regulatory and governance review
- Group General Counsel Brian Salter will take leave while the review is held
- AMP will make a submission to the inquiry to respond to the issues raised, including the independence of the report
“AMP apologizes unreservedly for the misconduct and failures in regulatory disclosures in our advice business,” Chairman Catherine Brenner said in the statement. “The board is determined that we will meet these challenges head on, accelerating changes in both culture and performance.”
Meantime, the government Friday announced tougher financial and criminal penalties for corporate misconduct, including 10-year jail sentences and fines of as much as A$210 million ($162 million). ASIC’s powers to investigate and prosecute wrongdoers will also be strengthened.
The revelations of misconduct are “very disturbing and indeed shocking,” Treasurer Scott Morrison told reporters in Melbourne. “The punishment must always fit the crime, and we must not forget these are not victimless crimes.”
“The past few days of hearings have been sobering for the entire industry,” Anna Bligh, the CEO of the Australian Banking Association, said in a statement. The banks “strongly back” the increased penalties for misconduct, she said.
©2018 Bloomberg L.P.