CBA misses some deadlines in advice compensation process
The Commonwealth Bank (CBA) is facing scrutiny from the corporate regulator over the time-frames within which it handled some reviews as part of its advice remediation programs, according to a new forensic report on past activities and compensation schemes of customers of 15 former advisers.
The Australian Securities and Investments Commission (ASIC) released its third report by KordaMentha Forensic assessing the steps taken by Commonwealth Financial Planning and Financial Wisdom to communicate with and compensate clients of the former advisers for advice provided between 2003 and 2012.
The report was required under additional conditions imposed by ASIC with consent on the Australian financial services licenses (AFSLs) of CFPL and FWL in August 2014. It involved 2,707 affected clients, while the licensees were also required to write to 1,626 ‘no evidence of advice clients', which was a total of 4,333 cases.
It found that in most instances the licensees complied with their licence obligations to consistently apply a remediation program to clients of the 15 advisers.
However, in some cases, the licensees failed to meet the required timeframes in the additional licence conditions. Out of the 201 cases that requested a ‘further licensee review' (FLR), the licensees undertook a review within the specified 90 days for 186 cases (92.5 per cent) but failed to meet the timeframe requirement for 15 cases (7.5 per cent).
For 10 out of 15 cases, clients subsequently received their FLR outcome letter within the next specified timeframe of 30 days, while in the remaining five cases it fell outside the timeframe.
In terms of compensation, the 185 cases of 15 former advisers received $.96 million as a result of the additional licence conditions. This was in addition to the $26.97 million paid to 707 of the same 15 advisers under a previous compensation program.
While there were initially 12 cases which were assessed as having received no advice, subsequent communication with the clients through letters resulted in the clients contacting the licensees to inform them that advice had been provided by advisers. Further assessment uncovered four out of the 12 cases had received inappropriate advice, resulting in compensation of $126,921.
The CBA acknowledged the release of the report, stating the report confimed the licensees took appropriate action to contact more than 4,300 customers in 2015.
Executive general manager, Advice Review program, Leif Gamertsfelder, said: "This report shows we have continued to deliver on our commitment to customers and demonstrates the thorough approach we have taken to identify any past issues and put things right for customers".
ASIC would publish the next forensic report in 2017, which would investigate the licensees' current review of advice provided in 2012 and earlier by 17 further potentially high-risk advisers, including any further compensation outcomes. The second report, which was aimed at identifying high risk advisers and reviewing and compensating affected customers, was released in December 2015.
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