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Wednesday 26 October 2011

11–229MR ASIC accepts enforceable undertaking from Commonwealth Financial Planning

ASIC today announced it has accepted an enforceable undertaking (EU) from Commonwealth Financial Planning Limited (CFP) following an investigation into the provision of advice by some of its financial advisers.

CFP is a wholly owned subsidiary of the Commonwealth Bank of Australia (CBA) and operates under the advice business structure of Colonial First State, which is also part of the CBA.

CFP has agreed to conduct a comprehensive review of its risk management framework and legal and regulatory obligations regarding the provision of financial services, financial advice and the monitoring and supervision of its representatives.

ASIC Chairman Greg Medcraft said: ‘This EU is significant as it requires CFP to comprehensively examine its risk management system to ensure non compliance issues will be detected at the earliest possible stage and remedied. It demonstrates ASIC will hold gatekeepers to account and expects licensed entities offering financial services to have the requisite systems in place and resources committed to their supervision, so financial consumers are confident when dealing with advisers.’

Under the EU, CFP will proceed to develop an implementation plan to address any unresolved deficiencies identified by the assessment of its risk management framework. The implementation of the plan will be the subject of review and ongoing reporting to ASIC over the next 2 years by an independent expert (whose engagement is to be approved by ASIC). Where a client is found to have been adversely impacted by the conduct of a representative, CFP will consider the circumstances and appropriately remediate the client.

The review by CFP under the EU will address ASIC’s concerns including whether:

  • there are adequate processes and controls in place to deal with ongoing risks of non-compliance
  • representative misconduct has been dealt with in a consistent manner
  • recurring themes have been appropriately identified
  • data analysis processes and reporting capabilities allow for early detection of advice process irregularities
  • there have been adequate controls over client records, and
  • there has been consistent application of CFP's complaints handling and internal dispute resolution processes.

Colonial First State has indicated to ASIC that it will seek to implement the benefits of its review of CFP’s risk management framework across all of its advice businesses.

ASIC acknowledges the cooperative approach taken by CFP in relation to this matter.

Background

In August 2010, CFP implemented a client compensation program following an ASIC investigation into the activities of its former adviser, Mr 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.

In March 2011, Mr Nguyen was disqualified from providing financial services for 7 years. He has appealed to the Administrative Appeals Tribunal for a review of this decision.

ASIC’s investigation into the conduct of several other former CFP advisers is continuing.

Former clients of Mr Nguyen or clients of other CFP advisers who believe they may be entitled to claim compensation should contact CFP directly on 1800 507 281.

View the enforceable undertaking

Last updated: 26/10/2011 12:00