ASIC mea culpa on CBA scandal
It has acknowledged its dealings with whistleblowers, who contacted the regulator with concerns about the financial planning operation in October 2008, were "not adequate".
In a submission lodged with a parliamentary inquiry raking over its performance in the scandal, the Australian Securities and Investments Commission has also revealed that it held major concerns about the operation of CBA's financial planning arm by early 2008, but did not make its concerns public.
ASIC's performance on the issue is being scrutinised by a Senate economics committee inquiry, launched in the wake of series of BusinessDay articles that exposed allegations of forgery, fraud and a cover-up by former CBA financial planners including Don Nguyen and Ricky Gillespie. Hundreds of clients are believed to have lost hundreds of millions of dollars as a result of the misconduct. The Commonwealth Bank has so far paid $50 million in compensation.
BusinessDay also revealed that ASIC took 16 months to act on the information provided by the whistleblowers.
ASIC said that it performed "extensive surveillance" on CBA financial planning in 2007 and 2008, uncovering evidence that the quality of advice and standards of practice in the operation were "unacceptable".
ASIC said it chose to deal with the issues on a "systemic" basis, putting in place a so-called continuous improvement compliance program that CBA agreed to adhere to.
It later found that planners had made false or misleading statements to clients and had made forecasts that were misleading or deceptive.
In its submission, ASIC admitted that "all stakeholders would have been better served" if it had made public the fact that CBA's financial planning arm had agreed to the compliance program.
"The public would have been informed, staff ... (including the eventual whistleblowers) would have been aware of ASIC's engagement with the business, and other participants in the industry would have better understood ASIC's expectations and its approach," ASIC said.
"As the process was not public, ASIC was not in a position to explain to the whistleblowers that the concerns raised about [Don] Nguyen had been incorporated within broader work to deal with similar concerns."
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ASIC conceded it should have been "quicker and more transparent" in its response to the CBA financial planning scandal. The regulator said it "could and should" have acted faster on whistleblower tip‑offs and acknowledged its dealings with whistleblowers who contacted it in October 2008 were "not adequate."
According to reporting by BusinessDay, ASIC took about 16 months to act on the information provided by whistleblowers. ASIC says it chose to address issues on a systemic basis and set up a continuous improvement compliance program with CBA, but it admitted its initial handling of whistleblower concerns was inadequate.
BusinessDay articles exposed allegations including forgery, fraud and a cover‑up by former CBA financial planners such as Don Nguyen and Ricky Gillespie. ASIC later found planners had made false or misleading statements to clients and issued forecasts that were misleading or deceptive, and hundreds of clients are believed to have lost significant sums.
The article states that the Commonwealth Bank has so far paid $50 million in compensation related to the financial planning scandal.
ASIC says it carried out "extensive surveillance" of CBA financial planning in 2007 and 2008 and uncovered evidence that the quality of advice and standards of practice in the operation were "unacceptable." It later identified specific instances of misleading or deceptive conduct by planners.
ASIC chose to deal with the problems on a systemic basis, putting in place a continuous improvement compliance program that CBA agreed to follow. ASIC later admitted that because this process was not public, stakeholders—including the eventual whistleblowers—would have been better served if the regulator had made its engagement and expectations public.
A Senate economics committee inquiry was launched to scrutinise ASIC's performance over the scandal after BusinessDay's revelations. The inquiry is examining ASIC's response times, transparency and whether it handled whistleblower information and its oversight of CBA appropriately.
The case shows ASIC itself admitted it was too slow and not transparent in handling serious concerns about bank financial planners. The regulator said public disclosure of its compliance work would have better informed clients, staff and the industry. For everyday investors, it highlights the importance of regulator transparency and the potential consequences when serious adviser misconduct is not promptly exposed.
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