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On 20 June 2013 the Senate referred an investigation into the performance of ASIC to the Senate Economics References Committee (Committee) for inquiry and report.
The Committee's final report was tabled on 26 June 2014.
From 2006 to 2010, CFPL advisers are alleged to have earned considerable commissions by placing their clients' funds into risky investments without permission. It is alleged that in some cases, the investments were effected by planners forging documents.
The Report was extremely critical of:
ASIC's investigations into the CFPL matter eventually resulted in ASIC banning several advisers, CFPL providing enforceable undertakings to ASIC, and CFPL providing compensation to more than 1000 customers.
The Report suggested that CBA's management was involved in an attempted cover-up of the activities, and recommended the federal government hold a royal commission in relation to the matter. To date, the federal government has resisted those calls for a royal commission.
Since publication of the Report, and the resulting media attention, CBA has announced the launch of an Open Advice Review program, being an internal review of the conduct of its financial planning businesses between the years 2003 to 2012.
Under the Open Advice Review program, if it is found that customers received poor advice during the relevant period from a CFPL financial planner or other staff member, an independent customer advocate funded by CBA will make an offer of compensation.
Customers who do not agree with the view of the independent customer advocate or, who are concerned with the assessment will have the option of recourse to an Independent Review Panel, led by The Honourable Ian Callinan AC. The Independent Review Panel will review individual cases and determine whether compensation is payable and, if so, how much. CBA will be bound by decisions of the Independent Review Panel but customers will have the option of taking the assessment to the financial ombudsman.
The inquiry has led to a call for a wider investigation into the financial planning arms of other industry participants.
It is not difficult to foresee how such egregious failings on the part of major participants in the financial planning industry may lead to greater scrutiny of all financial planners. This includes a rise in claims against financial planners and Australian Financial Services Licence holders and class actions in relation to perceived failures in management oversight and internal compliance programs.
Recently, FoFA has commenced and imposes important restrictions on how financial planners operate (see our earlier ClearLaw article titled "FoFA Update: FoFA reforms take effect, likely to survive"). In the context of FoFA, there are two obvious means by which greater scrutiny may arise:
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