Licence conditions to be imposed on two Commonwealth Bank financial planning businesses

The Australian Securities & Investments COmmission (ASIC) has announced that it will impose, by agreement, licence conditions on the Australian financial services licences of two financial planning businesses owned by the Commonwealth Bank of Australia (CBA) – Commonwealth Financial Planning Limited (CFPL) and Financial Wisdom Limited (FWL).

The conditions will require both businesses to undertake significant further work in relation to the compensation process for customers and will put in place independent monitoring of that work.

ASIC is taking this action after CBA informed ASIC that the original process developed to compensate customers of two former CFPL advisers was not applied consistently across all impacted customers of the two businesses. This inconsistency disadvantaged some customers.

ASIC Chairman Greg Medcraft said, ‘The problem is not with the original compensation arrangements, but in the implementation. The compensation process originally developed was carefully designed to include a range of measures to protect the interests of customers involved. ASIC is extremely disappointed that not all of those measures were applied to all customers. We are now taking immediate action to remedy the inconsistent treatment.’

The measures in the compensation process that were not consistently applied were:
upfront communication with affected customers of advisers where there were concerns about the quality of advice, advising them of those concerns, informing them that there would be a review of the advice previously provided to them and providing an opportunity to raise issues, and
the offer of $5,000 to customers to obtain independent advice in order to help them assess whether the review of their advice and any compensation offer was adequate.

Both measures were implemented in relation to customers of two former advisers within CFPL – Don Nguyen and Anthony Awkar. However, they were not applied to customers of other former CFPL and FWL advisers, about whom there had been concerns.

More than 7,000 files were reviewed. More than 1,100 customers have received compensation to date. Now more than 4,000 customers will be given an opportunity, if they wish, to have the question of compensation reopened.

ASIC Chairman Greg Medcraft said, ‘I want to stress that we have not identified problems with the actual file reviews done in the compensation process nor with the amounts of compensation offered to customers. The problems in the process were with the communication.’

Customers who did not get the benefit of those measures will now get them which will allow them to access independent advice and seek compensation or test their compensation amount. This will be regardless of whether they have entered into a settlement. They will also have access to the Financial Ombudsman Service if they are not satisfied with the outcome.

These corrective measures will be subject to oversight by an ASIC-appointed independent expert. The expert will also check to confirm that there were no other changes to the original methodology. The independent expert will report to ASIC and the results made public.

ASIC has today also lodged a statement to correct the record with the current Senate Inquiry. Some of the information ASIC put to the Senate Inquiry about the compensation process was inaccurate because it was based on its understanding of information from CFPL, in particular CFPL’s submission to the Senate Inquiry.
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