SYDNEY (Reuters) - Australia’s largest-listed wealth manager AMP announced the resignations of its chairwoman and legal counsel on Monday, and slashed its directors’ fees by a quarter as it races to stem the fallout from damaging revelations of misconduct at the firm.
The exits follow disclosures at a judicial inquiry into the country’s financial sector that AMP misled many customers and deceived the corporate regulator. The scandal has already caused the early departure of CEO Craig Meller, who was due to leave by year end, and analysts expect more heads will roll.
Chairwoman Catherine Brenner and group General Counsel Brian Salter will depart immediately, AMP said in a statement.
Mike Wilkins, a former independent director who has been named both interim chairman and CEO, said the evidence given to the government-backed Royal Commission is “being treated extremely seriously by the board”.
“Appropriate steps are being taken to address the issues raised, and remediating our customers is being given utmost priority,” he said.
AMP, which is also staring at a possible class action, has seen around A$2.2 billion ($1.7 billion) wiped off its market capitalization over the past two weeks in the wake of the revelations. It was valued at A$11.6 billion at Friday’s close.
The inquiry was told that advisers at AMP misappropriated funds of thousands of clients over the last decade by charging them without providing advice, and that it had repeatedly lied to the Australian Securities and Investments Commission (ASIC).
Counsel assisting the inquiry said on Friday that AMP had breached provisions of the Corporations Act that carry criminal sanctions.
Brenner, Salter and Meller were singled out by the inquiry as part of a group of senior executives that allegedly modified a report by law firm Clayton Utz and submitted it to the regulator in late 2017 as “external and independent”.
Their intention was to limit the report’s findings about the involvement of AMP’s senior executives in misappropriating customer fees, the inquiry heard.
AMP said in its statement that Brenner, Meller and the other directors “did not act inappropriately in relation to the preparation of the Clayton Utz report”.
The statement did not comment on Salter’s behavior.
The company said it would make a formal submission in response to the allegations raised at the commission by May 4.
The “employment and remuneration consequences” for individuals who were responsible for charging fraudulent fees will be determined once an external employment review is completed, which is expected shortly, it said.
AMP added that it would slash fees for board directors by 25 percent for the rest of 2018 as a recognition of the “collective governance accountability for the issues raised in the Royal Commission and for their impact on the reputation of AMP”.
AMP has already started searching for a new CEO, and will fast track the selection of a new chair to “help ensure stability and further strengthen governance”, Wilkins said.
David Ellis, an analyst at Morningstar, said it was likely more executives and board members would leave in coming weeks.
“All bets are off,” Ellis said. “With a new CEO and a new board, the future strategy could be completely different.”
AMP is currently staring at a possible shareholder class action, with litigation financier IMF Bentham Ltd saying it plans to fund one against the wealth manager regarding alleged misconduct as revealed by the commission.
An AMP spokeswoman declined to comment on the proposed class action.
The Royal Commission is just a couple of months into what is expected to be a year-long investigation. The inquiry will be able to make wide-ranging recommendations including legislative changes and on criminal or civil prosecutions.
($1 = 1.3201 Australian dollars)
Reporting by Aaron Saldanha in Bengaluru; Editing by Jane Wardell and Himani Sarkar