When Commonwealth Financial Planning (CFP) was subjected to an enforceable undertaking imposed by the Australian Securities and Investments Commission (ASIC) in 2011, it was the subject of a good deal of media coverage in Money Management and elsewhere – and for very good reasons.
Now, two years later, some of the underlying reasons for those ASIC actions have been widely canvassed over a number of weeks by the Sydney Morning Herald and, inevitably, that coverage has again raised questions about the honesty and integrity of the broader financial planning industry.
Once again an entire industry is being judged against the actions of a few bad apples.
At the time of writing, the Sydney Morning Herald’s coverage appeared to have failed to mention a number of important facts:
- The key executives at Commonwealth who had charge of the situation have moved on, some to similarly senior positions at other financial institutions.
- The key executives who had carriage of the situation at ASIC have also moved on.
- Whistleblowers were not the only source of the information prompting the latest rash of media coverage – commercially-motivated litigation funders have also played a part.
Nothing can excuse the conduct which occurred within Commonwealth Financial Planning, or the culture that gave rise to that conduct.
On the numerous occasions on which this publication has published stories related to the events within Commonwealth Financial Planning, the Money Management website has carried frequent comments relating to “sales-based cultures” and the “setting of targets”.
However, culture aside, those at the centre of the problems at CFP were also clearly guilty of more than just bad practice. They were also guilty of dishonest conduct capable of criminal prosecution.
Should the Commonwealth Bank have been quicker to identify the problems in its midst? Almost definitely. Did it act appropriately thereafter? For the most part, yes.
In its announcement of CFP entering an enforceable undertaking, ASIC noted that it had “implemented a client compensation program following an ASIC investigation into the activities of its former adviser, Don Nguyen”.
“In cases where inappropriate advice was given by Mr Nguyen, CFP calculated the investment positions the clients would have held had they received the appropriate advice and compensated them accordingly,” it said.
Did ASIC react promptly enough to the information apparently provided by whistleblowers? Apparently not. But this is consistent with the pace at which the regulator and its sister regulator, the Australian Prudential Regulation Authority (APRA), acted with respect to the Trio/Astarra debacle.
Some commentators have suggested that ASIC failed to act promptly to the whistleblower’s tip-offs because it was under-resourced.
That is a very sympathetic and possibly blinkered assessment. In reality, ASIC failed to act particularly quickly to the CFP, Storm Financial and Astarra issues because of its own culture – one based on timid interpretations of its regulatory power.
Sadly, writing about events which occurred more than a half decade ago only serves to further tarnish the reputations of the vast majority of honest and diligent financial planners. Just like the executives at CFP, the industry has moved on.
