The extent and speed of the Australian Security and Investments Commission’s (ASIC) investigation into Commonwealth Financial Planning (CFPL) was questioned yesterday during the Senate Economic Reference Committee’s inquiry into the regulator.
“How deep did they probe?” asked committee member Senator David Fawcett, in relation to the regulator’s investigation into forgery and fraud allegations directed at former CFPL financial planners, Ricky Gillespie and Don Nguyen.
A similar line of inquiry was adopted later in the session by Senator John Williams, who questioned the actions of ASIC in gathering relevant client documentation as part of its forensic investigation.
In response, David Cohen, CFPL’s general counsel, says they provided the report, “but ASIC was later unable to find the initial report.”
Williams also queried whether it was appropriate for CFPL to engage the services of Price WaterhouseCoopers (PwC) to oversee the enforceable undertaking (EU) regime that was later imposed by ASIC. PwC’s role as independent reviewer was endorsed by ASIC.
“Is it a conflict of interest for PwC to be auditor and independent reviewer of the CFP’s EU? I’d argue it is,” Williams said, referring to the millions of dollars the accounting firm receives as the bank’s auditor.
Williams also asked CFPL to explain what measures it had taken to address the regulator’s concerns since the EU was imposed.
“Clearly, things were wrong,” he said.
“What gives us the evidence that things from now on will be done right?”
Annabel Spring, group executive of wealth management for CFPL, pointed to the group’s $25 million investment in document management and early warning and adviser profiling systems. She also highlighted steps CFPL had taken to alter the organisation’s employee culture and to restructure its risk and compliance operations.
Marianne Perkovic, executive general manager of advice for CFPL, said that changes to adviser remuneration structures had also been introduced as a result.
“The main part of this was a restructuring of the remuneration process, having moved to a more balanced scorecard approach for advisers and their managers,” Perkovic said.
Cohen and Perkovic also pointed to internal disciplinary action taken by CFPL, which saw a total of 72 people leave the bank’s wealth division. This included 12 planners that were terminated, 11 that resigned along with sanctions imposed against other staff members.
“It’s a very different situation today,” Cohen said.
This view was backed by Perkovic, who said: “Our file review processes have changed. Our compliance processes are completely different.”
