The Commonwealth Bank of Australia is in trouble with the Australian Securities and Investments Commission again, with the regulator accepting its second enforceable undertaking from the banking giant in just over two years.
CBA-owned CommSec and Australian Investment Exchange have been ordered to appoint an independent expert to review their handling of client money and develop a plan to rectify any deficiencies, after weaknesses were uncovered in their client money-handling arrangements.
Those weaknesses related to withdrawing client money from trust accounts without the required written authorisations and failing to separate client money from CommSec’s and Ausiex’s money.
Under the law, licensees must keep client money separate from their own to protect the interest of retail investors.
ASIC commissioner Cathie Armour warned businesses that hold client money to ensure they have the proper management, oversight and controls in place or face regulatory action.
“Client money must be adequately protected and where it isn’t, ASIC will take action,” she said.
The independent expert must report to CommSec and Ausiex by mid-2014, following which both parties must provide and implement a remediation plan if required.
In October 2011, ASIC also accepted an enforceable undertaking from CBA-owned advice group, Commonwealth Financial Planning after an investigation found the bank had failed to adequately monitor and supervise the advice provided by its authorised representatives.
The regulator’s actions resulted in seven CFP advisers being banned and a comprehensive compensation program which saw more than 1,100 investors receive $50 million in compensation to date.
