AMP hurt by compliance breach report

AMPshares took a further beating in trading this morning, falling more than 9 per cent or 44c to record lows of $4.31, following the leak of a draft audit report in the UK exposing “high profile mandate breaches” in the group’s Henderson Global Investor UK-business.

The pressure on the share price was confounded byMerrill Lynchreducing its earnings forecast for the group and AMP’s decision to quit the Australian listed property trust (LPT) market.

The 9 per cent fall comes less than 24 hours after yesterday’s record low in which the stock slid 15c to close $4.75, a far cry from the $19 valuation placed on AMP at the time of its demutualisation and listing in 1998.

News of the alleged compliance breaches appeared in the UK’s Independent newspaper and the result of a report dated July 4. It claimed deficiencies in Henderson’s risk controls exposed the group to “significant financial and reputational damage”.

However AMP in Australia played down the findings claiming the report was only a first draft. The group also argued that it contained some inaccuracies, adding there was no threat to clients and their investments.

“The processes that were reviewed were mainly internal processes and not related to client matters. Most importantly, the review team did not find any breaches of any client mandate,” AMP argued.

Yesterday the Henderson arm of AMP proposed to restructure its remaining LPT - the AMP Office Trust (AOF) - through the creation of a new management company, Ronin Property Group, which would replace Henderson as manager.

Merrill Lynch reduced its forecast for the group after AMP chief executive officer Andrew Mohl said the cumulative impact of the change to AOF would be a reduction in profits of $16.5 million per annum.