Updated
Australia’s corporate watchdog has ordered the Commonwealth Bank’s financial planning arm to immediately stop charging its customers ongoing service fees, hours before the Government releases the banking royal commission’s final report.
The Australian Securities and Investments Commission (ASIC) said Commonwealth Financial Planning (CFPL) had breached a court-enforceable undertaking in relation to its “fee for no service” scandal.
It had also been ordered not to enter into any “new ongoing service arrangements” with customers.
The practical consequence of ASIC’s directive is that existing clients can continue to receive services from CFPL, but they cannot be charged for that work.
CFPL was supposed to submit a final report on January 31 — prepared by its independent expert Ernst & Young (trading as EY) — on whether it had taken “reasonable steps” to remediate overcharged customers.
However, CBA’s financial planning division missed that deadline because the consulting firm prepared a different report outlining problems with compliance.
In an unexpected blow to Australia’s largest bank, the report criticised CFPL’s remediation program for having “a heavy reliance” on manual controls, which “have a higher inherent risk of failure due to human error or being overridden”.
EY also recommended that CFPL address those issues within 120 days.
ASIC was also waiting to receive an attestation last Thursday — from a CBA “accountable person” in regards to the adequacy of CFPL’s customer remediation program, along with its internal systems, processes and controls.
The regulator said it received a written update from CBA, but it was not “acceptable” in light of “concerns raised by the independent expert”.
Commonwealth Bank’s share price rose 0.6 per cent to $70.20 at 12:25pm (AEDT).
More to come.
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