Australian Securities and Investments Commission (ASIC) deputy chairman Peter Kell has defended the regulator’s actions in assessing illegal activity and conflicts of interest within Commonwealth Financial Planning (CFPL).

With the watchdog facing a Senate inquiry over it’s handling of the high-profile investigation, Kell said ASIC welcomed the opportunity to explain “what we do, what we have achieved and what we seek to achieve”.

In his opening statement to the Parliamentary Joint Committee (PJC) on Corporations and Financial Services he defended the time taken by the regulator to resolve the CFPL case.

“CFP was a complex matter and cases like this involve much background work before a public result is achieved. That is how law enforcement works. ASIC has to also carefully assess information presented to us and make judgments about what would stand up in court,” he told the PJC.

Kell added that the media had every right to shine a light on the conduct at CFPL but reminded the PJC that the incident has occurred five years ago and that financial planning has come along way since then.

“There was unacceptable and unlawful conduct at CFP. Clients were given inappropriate advice and many suffered badly because of it,” he said.

“And that is exactly why ASIC took serious enforcement action.”

Protection for whistleblowers

To date ASIC has banned seven CFPL advisers, set up a compensation system and forced the company into an enforceable undertaking that required it to change the way it does business.

On the topic of whistleblowers, Kell said ASIC cannot and will not discuss whistleblower involvement in any particular case.

“What person would approach ASIC if they suspected we might discuss their case with a newspaper reporter? In fact, we go out of our way to protect whistleblowers and several years ago successfully fought a case in the federal court to conceal someone’s identity,” he said.

“More broadly, and as this committee knows more than most, there is major law reform underway for the financial planning industry, largely in response to major mis-selling episodes.

“Conflicts of interest, arising from commission-based payments, were at the heart of the problems with CFP. The Future of Financial Advice reforms, which start in a few weeks, include a prohibition against commissions going forward and there will be a new duty to act in the client’s best interest.”

4 comments on “ASIC defends “complex” Commonwealth probe”

    Reseau collapsed in 2010. Similar to storm in many respects it has not had the same limelight. I tried to get ASIC to look at it but it was impossible to find anyone capable of speaking to. Like storm early action would have saved a great deal of angst and loss. Perhaps we need a connection between our professional bodies and ASIC or the minister to ensure that ASIC get off their proverbial and take the required action in a timely manner.

    darren dobber

    ASIC have dropped the ball over and over again.

    ASIC must take a level of responsibility for allowing Storm to happen. Storm’s activities were well known within the industry as was the questionable reputation of Storm’s principals.
    ASIC conduced an AFSL audit (was well as an audit in preparation for an ASX listing) in the twelve months before Storm blew up. They signed off on the AFSL audit with words to the effect that Storm was the best run AFSL in the country. This is despite the fact that they were regularly and consistently recommending gearing strategies for people for whom a gearing strategy was completely inappropriate.

    A consumer is entitled to believe that if they seek advice from an adviser licensed by ASIC that they (i) satisfy minimum technical competency standards and (ii) are required to place their client’s interests ahead of their own and (iii) are required to comply with a code of ethics. Storm adviser satisfied none of these standards.
    ASIC seem obsessed with seeming over doing. Delivering a banal and unsophisticated package in FOFA that is likely to increase the cost of financial advice and reduce the overall quality.

    When it comes to regulating advisers, they seem more interested in chasing high profile scalps like Macquarie or spending money and resources on non-issues like insurance ‘churn’ rather than identifying solutions for managing the compliance and professional conduct of the financial planning industry as a whole.

    And now they must take their share of the blame for the CFP debacle. Frankly it is a disgrace and people should lose their jobs over it.

    An overhaul of ASIC’s responsibilities in relation to regulating advisers is badly needed.

      Ian Hamilton

      agree with most of your comments Darren, but what i have heard the Storm Planners wrote what they liked on fact finders to obtain CBA margin loans and therefor were the ones who created such a debarcle of poor advice. And now I cop the pain of this as I do my 27 + page retirement SOA.

      Ian H

      darren dobber

      I’ve heard that as well Ian.

      The question is, why didn’t ASIC pick this up in their AFSL audit and take action rather than hail them at the “best run AFSL in the country”.

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