In an explosive report tabled yesterday, the Senate Economics Committee has called for a Royal Commission into the conduct of the Commonwealth Bank’ Financial Planning (CFPL) arm and ASIC’s handling of the affair.
The findings of the report are an indictment on both ASIC and the CBA’s ability to recognise and manage the misconduct identified.
Specifically the committee says that initially they found:
- The conduct of a number of rogue advisers working in CFPL was unethical, dishonest, well below professional standards and a grievous breach of their duties—in particular the advisers targeted vulnerable, trusting people;
- Both ASIC and the CBA seemed to place reports of fraud in the ‘too hard basket’, ensuring the malfeasance escaped scrutiny and hence no one was held to account;
- The CBA’s compliance regime failed, which not only allowed unscrupulous advisers to continue operating but also saw the promotion of one adviser, thus exposing unsuspecting clients to further losses;
- There was an inordinate delay in CFPL recognising that advisers were providing bad advice or acting improperly and in CFPL acting on that knowledge and informing clients and ASIC;
- ASIC was too slow in realising the seriousness of the problems in CFPL, instead allowing itself to be lulled into complacency and placing too much trust in an institution that sought to gloss over its problems;
- ASIC did not pay sufficient attention to the whistleblowers who raised serious concerns about the conduct of Mr Nguyen and the actions of CFPL.
Crucially though, the committee says that as it peeled back the onion and “gathered more and more evidence however, lingering doubts began to grow about the robustness and fairness of the ASIC-sanctioned compensation process for CFPL clients who had suffered losses because of adviser misconduct”.
Recently, the committee said, both the CBA and ASIC “have corrected testimony” and the committee is:
Now of the view that the CBA deliberately played down the seriousness and extent of problems in CFPL in an attempt to avoid ASIC’s scrutiny, contain adverse publicity and minimise compensation payments. In effect, the CBA managed, for some considerable time, to keep the committee, ASIC and its clients in the dark. The time is well overdue for full, frank and open disclosure on the CFPL matter.
The committee is of the view “there are potentially many more affected clients that have not been fairly compensated” and that “ASIC’s ability to monitor the CBA’s implementation of its new undertaking regarding the compensation process is severely undermined”.
Hence “The committee is of the view that a royal commission into these matters is warranted”.
Finance Minister Mattias Cormann has said that the Government will consider the 500-plus page report before making a decision on what to do next.
You can find the full report here