The Senate Economics References Committee has called for a Royal Commission into the conduct of Commonwealth Bank and its financial advisers, as it hands down a report that is scathing of both the banks’ supervision of its financial planners and of the performance of the Australian Securities and Investments Commission as the regulator.
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The Committee’s 61 recommendations
ASIC statement on senate committee report
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The chair of the committee, Senator Mark Bishop, says “the conduct of a number of CFPL [Commonwealth Financial Planning] advisers was unethical, dishonest, well below professional standards and a grievous breach of their duties”.
“The way in which vulnerable trusting people were targeted shows that the CFPL planners involved had a callous disregard for their clients’ interests. That a major financial institution could have tolerated for so long conduct that included apparent criminal activity is not easy to accept,” Bishop says.
In a statement, Bishop says ASIC’s slow response to the CFPL case and lack of scepticism is also hard to explain. ASIC allowed itself to be lulled into complacency and placed too much trust in an institution that sought to patch over its problems. Moreover, until as recently as May 2014 ASIC clearly did not fully understand how the CBA was compensating clients affected by the serious misconduct at CFPL and another CBA financial advice business.
He says despite indications that positive changes are now taking place for current clients, the committee is not convinced by the assurances it has been given about the compensation process for clients affected by past practices. Further, all rogue advisers need to be identified and any conduct that may amount to a breach of any law or professional standard pursued.
“Given the seriousness of the misconduct involved the committee believes that a Royal Commission should be established to examine this matter,” he says.
The committee today handed down its long awaited and delayed report on its inquiry into the performance of the Australian Securities and Investments Commission (ASIC), including the corporate watchdog’s oversight of Commonwealth Financial Planning Ltd (CFPL).
The committee was due to table its report on May 30, but was forced to delay after it received additional information from ASIC setting “inconsistencies in the way in which the compensation arrangements for CFP clients had been applied” for CFPL clients who lost money as a result of shoddy advice provided by CFPL financial planners.
The report contain 61 recommendations, including Recommendation 7, that “the government establish an independent inquiry, possibly in the form of a judicial inquiry or Royal Commission” with the aim of:
– Thoroughly examining the actions of the Commonwealth Bank of Australia (CBA) in relation to the misconduct of advisers and planners within the CBA’s financial planning businesses and the allegations of a cover up;
– Identifying any conduct that may amount to a breach of any law or professional standard;
– Reviewing all files of clients affected or likely to be affected by the misconduct and assess the appropriateness of the compensation processes and amounts of compensation offered and provided by the CBA to these clients; and
– Making recommendations about ASIC and any regulatory or legislative reforms that may be required.
What is independence? And where is this mythical person/firm?