Deficient compensation scheme forces CBA to contact 4300 clients
The Commonwealth Bank (CBA) will be required to contact 4330 clients and offer $5000 for a review of financial planning advice supplied by the bank and to allow the clients to seek their own independent advice.
The moves comes as part of the release of the first report from the Australian Securities and Investments Commission (ASIC) into the compensation schemes for advice provided by Commonwealth Financial Planning Limited (CFPL) and Financial Wisdom Limited (FWL) which it had stated had been inconsistent and deficient.
ASIC said the report, one of three prepared by KordaMentha, confirmed "the inconsistency and deficiencies of an original $52 million compensation scheme" which ASIC had addressed by imposing additional licence conditions on CFPL and FWL in May and August of last year.
However, ASIC said the failings of that scheme were being rectified through the forensic review being conducted by KordaMentha that CBA will contact approximately 2740 clients offering them up to $5000 to have their financial advice independently.
CFPL and FWL will also contact a further 1590 clients who were found not to have received advice. However if this was not the case and they had received advice they would also be offered the $5000 assistance.
A further 86 clients will also be contacted who did not receive the initial $5000 offer or an initial letter explaining that their advice was being reviewed with CBA committing to ASIC these clients would be treated in line with other clients under the licence conditions imposed last year.
The first report covered clients who had received advice from banned former CFPL advisers, Don Nguyen and Anthony Awkar, and from other former CFPL and FWL advisers who received advice separately from clients of Nguyen and Awkar.
It found that many clients of Nguyen and Awkar, who were to receive a letter stating the advice given was under investigation by CFPL, did not receive the letter and for those that did the letters left out details including the adviser's name and the ongoing investigation.
It also found that letters sent to clients of Nguyen and Awkar included the $5000 offer, while the offer was only discretionary and ultimately offered to none of the clients of other former advisers.
The report also found many of this latter group were not informed they may be able to receive compensation and were not given an opportunity to involved with review and decision making processes as to whether they were entitled to compensation.
KordaMentha has yet to release the second and third reports which will cover whether CFPL and FWL had a reasonable basis for identifying the clients and advisers for the original compensation scheme and an assessment of the compensation work to date and the two group's compliance with the licence condition program.
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