The Australian Securities and Investments Commission (ASIC) said it has accepted an enforceable undertaking (EU) from subsidiaries of the Commonwealth Bank of Australia (CBA) for charging fees where no service was provided.
The regulator found Commonwealth Financial Planning Limited (CFPL) and BW Financial Advice Limited (BWFA) failed to provide, or failed to locate evidence regarding the provision of, annual reviews to approximately 31,500 ‘ongoing service’ customers in the period from July 2007 to June 2015 (for CFPL) and from November 2010 to June 2015 (for BWFA).
As BWFA ceased trading in October 2016, CFPL is the focus of the compliance improvements required under the EU, ASIC said.
The EU required, among other things, that CFPL and BWFA pay a community benefit payment of $3 million in total, and that that CFPL provide an attestation from senior management setting out the material changes that have been made to CFPL's compliance systems.
It also requires that CFPL provide further attestations from senior management that CFPL's compliance systems and processes are now reasonably adequate to track CFPL's contractual obligations to its ongoing service clients, ASIC said.
“Our report into Fees For No Service in October 2016 identified the major financial institutions' systemic failures in this area, and called for fair compensation to be paid to customers who did not receive the advice reviews that they were promised and paid for,” ASIC deputy chair Peter Kell said.
“This enforceable undertaking follows on from the earlier enforceable undertaking accepted by ASIC in relation to ANZ's fees for no service conduct.
“These failures show that all too often the financial institutions prioritised revenue and fee generation over the delivery of advice and services paid for by their customers.”
In addition to the EU, CFPL and BWFA have also agreed to compensate approximately 31,500 affected customers in the period from July 2007 to June 2015 (for CFPL) and from November 2010 to June 2015 (for BWFA), the regulator said.