01.CBA to provide up to $5000 to help customers reassess earlier decisions
The corporate regulator has imposed new conditions on two of Commonwealth Bank’s financial planning arms that include contacting more potential victims of rogue planners and paying for legal advice.
has announced that the continuation of the financial services licences of Commonwealth Financial Planning Limited and Financial Wisdom Limited will be contingent on the bank contacting customers who may be entitled to compensation but have yet to receive it.
CBA’s initial investigation limited its focus to 7000 clients, about 1100 of whom were compensated. But during a recent government inquiry
into ASIC, a former CBA employee and whistleblower, Scott Morris, said many more customers had suffered serious financial loss as planners vied for bonuses and recommended risky and ill-fated investment strategies.
Among other tactics, managers reportedly pushed planners to move clients out of low-risk term deposits and into potentially perilous mortgage funds in order to meet sales goals.
Mr Morris first contacted ASIC in 2008, and the agency mounted a legal case against the bank in 2011.
ASIC’s new conditions
In a recently released statement,
ASIC outlined the following steps CBA’s financial planning businesses must take in order to hold on to their financial services licences.
Customers whose cases were previously reviewed by CBA for possible compensation but who haven’t received it must be re-contacted and offered:
- A further review.
- Up to $5000 to pay for legal help in assessing the original review of their advice and any compensation offer.
- An opportunity to have their case assessed by the Financial Ombudsman Service (FOS) without any limitation period or claim threshold that would normally apply to FOS matters.
"These conditions and their oversight by an ASIC-appointed expert provide confidence that relevant customers who received poor advice will be appropriately compensated, and that if the AFS licensees' processes for identifying deficient advice and affected customers were not adequate, that corrective measures are taken," ASIC Chairman Greg Medcraft said.
CBA’s own game plan
In an earlier and separate action, CBA announced an expansion of its remediation program in July following the ASIC inquiry. ASIC says that clients covered by the new AFS licence conditions “may, if
they wish, also have their case assessed under that program in addition to, or instead of, the process in the conditions”.
It added that AFS licence holders that do not comply with the conditions of their AFS licence "could face suspension or cancellation of their AFS licence".
About 80% of the financial advice industry is reportedly owned by or has close connections to banks. The institutionalised conflict of interest was a main focus of the Future of Financial Advice reforms, which were recently watered down by the government after heavy lobbying by banks.
During the inquiry, ASIC was criticised for not acting sooner in the CBA and other prominent cases.