ASIC has released a report prepared by KordaMentha Forensic on the actions of Commonwealth Financial Planning Limited and Financial Wisdom Limited in compensating clients.
This report, the first of three, confirms deficiencies in the original compensation scheme that lead ASIC to impose licence conditions on Commonwealth Financial Planning Limited and Financial Wisdom Limited in 2014.
The report compares the approach to compensating clients of Don Nguyen and Anthony Awker (Project Hartnett) with the approach adopted to compensate clients of 25 other advisers who were the subject of significant breach notifications (Project Baringa).
Some findings of the report include:
- In 3,452 of the 4,330 cases assessed in the Compensation Program, clients of advisers did not receive any form of initial letter informing them that an investigation was being conducted into the advice provided to them and that following completion of the review, the client would be informed of the outcome.
- 262 letters stated “It’s time to review your financial plan” and made no reference to any potential issues with the advice or any investigations relating to the adviser.
- Out of 776 cases who should have received an offer of $5,000 for independent professional advice, in 54 cases the client did not receive such an offer.
- Some clients of advisers covered by Project Baringa have never received any communication regarding the investigation or that they had been assessed as not being entitled to compensation (depriving them of the opportunity to participate in the review and decision-making process).
A potential major weakness in the report is revealed at paragraph 80 of the report:
“The statement and opinions contained in this report are given in good faith, and to a large extent depend on the accuracy and completeness of information and documentation provided to us by CBA, and explanations provided to us by CBA employees and legal representatives. The scope of this Comparison Report does not extend to testing the accuracy and completeness of the information provided to us…”
The report is available for download here.