THE corporate regulator has claimed another scalp from its investigation into adviser behaviour in the Commonwealth Bank-owned business, Commonwealth Financial Planning Ltd, raising the question of the bank's liability for more compensation payments to aggrieved customers.
The Australian Securities and Investments Commission yesterday issued a statement that former CFPL adviser Simon Langton, of Mindarie, Western Australia, had failed to meet obligations as a financial adviser, and said former clients who believed they may be entitled to claim compensation should contact CFPL.
Mr Langton has an enforceable undertaking with ASIC not to provide financial services for two years, to undertake professional education and, if he returns to the industry, to be supervised for 12 months.
He is the second Commonwealth Financial Planning adviser to be named, following the high profile banning for seven years of a star adviser, Don Nguyen, who worked at the bank's Chatswood branch.
The bank agreed to a major client compensation program for Mr Nguyen's clients, and also settled a multimillion dollar class action brought by clients, many of them retirees who had requested conservative investments, and instead ended up with high-risk portfolios.
CFPL itself entered into an enforceable undertaking with ASIC in October, as a result of regulatory and systems concerns identified in the Nguyen investigation. It is required to review and address any deficiencies in its risk management framework, and also consider and "remediate" the position of clients who have been adversely affected.
ASIC said yesterday its "investigations into the conduct of several other CFPL advisers are ongoing".
While ASIC has defended its use of enforceable undertakings, as an alternative to court action or administrative proceedings, the consumer group Choice has pointed out these settlements mean important details such as the losses of those affected are kept away from the public eye.
When BusinessDay asked the bank yesterday whether it had paid any compensation to Mr Langton's clients, a spokeswoman said: "Any compensation is confidential."
According to ASIC, Mr Langton, 36, primarily provided insurance and superannuation rollover advice until he was "terminated" from CFPL in June 2010. ASIC began investigating his advice in April 2011. It said between April 7, 2008, and June 23, 2010, he failed to complete financial needs analysis documentation, allowed clients to sign blank financial needs analysis documentation and failed to make reasonable inquiries about clients' personal circumstances before implementing advice. He also failed to provide clients with statements of advice, or provide them within a reasonable time. He also failed to disclose fees in a statement of advice to one client.
In a statement, the bank said CFPL would follow the program agreed with ASIC in October 2011. "We are committed to implementing changes that will benefit our clients and have already enhanced our focus on training and education as part of our voluntary program," it said. "We take seriously the quality of advice provided by our financial advisers and will continue to work through any issues ... Compensation is determined on a case-by-case basis."
Frequently Asked Questions about this Article…
What did ASIC find in its investigation of Commonwealth Financial Planning adviser Simon Langton?
ASIC found that former CFPL adviser Simon Langton failed to meet core adviser obligations between April 7, 2008 and June 23, 2010. Specific failings included not completing financial needs analysis documentation, letting clients sign blank documentation, failing to make reasonable inquiries about clients' personal circumstances before implementing advice, not providing statements of advice in a reasonable time (or at all), and failing to disclose fees to one client.
What penalties did ASIC impose on Simon Langton and what restrictions apply if he returns to the industry?
Mr Langton agreed to an enforceable undertaking with ASIC that bars him from providing financial services for two years and requires him to undertake professional education. If he returns to the industry after that period, he must be supervised for 12 months.
If I was a client of a Commonwealth Financial Planning adviser, how can I find out if I’m entitled to compensation?
ASIC advised former CFPL clients who believe they may be entitled to compensation to contact Commonwealth Financial Planning Ltd (CFPL). CFPL has been required to consider and remediate clients adversely affected as part of its enforceable undertaking with ASIC.
Has the Commonwealth Bank paid compensation to the clients of advisers named by ASIC?
The article reports the bank said any compensation is confidential, so whether compensation has been paid in specific cases (for example Mr Langton’s clients) is not publicly disclosed. For guidance, affected clients should contact CFPL directly.
What action did ASIC take against CFPL itself after the Don Nguyen matter?
CFPL entered into an enforceable undertaking with ASIC in October 2011 in response to regulatory and systems concerns identified in the Nguyen investigation. The bank was required to review and address deficiencies in its risk management framework and to consider and remediate the position of clients who had been adversely affected.
Why does ASIC use enforceable undertakings instead of court action, and what are the criticisms?
ASIC says enforceable undertakings are an alternative to court action or administrative proceedings that can secure outcomes such as bans, education and remediation. Consumer group Choice has criticised these settlements because they can keep important details — including losses suffered by clients — out of the public eye.
What red flags about financial advice should everyday investors watch for, based on ASIC’s findings?
Investors should watch for red flags such as advisers not completing or asking you to sign blank financial needs analysis documents, delays or failures to provide a statement of advice, poor inquiries about your personal circumstances, and lack of clear disclosure about fees. These were exactly the shortcomings ASIC identified in its CFPL investigations.
Are ASIC’s investigations into other Commonwealth Financial Planning advisers still ongoing?
Yes. ASIC said its investigations into the conduct of several other CFPL advisers are ongoing, so further findings or actions may follow as those enquiries progress.
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