Commonwealth Financial Planning Limited (CFPL) has been forced to stop charging or receiving any ongoing service fees from existing and new customers after it failed to meet the terms of an enforceable undertaking (EU).
The Australian Securities and Investments Commission (ASIC) stated CFPL had not provided it with an attestation and acceptable final report from an independent expert, which were required under the EU entered into with ASIC in April last year in relation to CFPL’s fees-for- no-service conduct.
The EU required CFPL to provide a final report on whether it had taken reasonable steps to remediate customers affected by its fees-for-no-service conduct and on the adequacy of its systems, processes and controls.
CFPL was also required to provide an attestation from a Commonwealth Bank of Australia (CBA) ‘accountable person’ under the Banking Executive Accountability Regime as to its remediation program and the adequacy of systems, processes and controls.
The regulator stated while it had received a report from independent expert Ernst & Young on 31 January, as well as a written update from CBA’s accountable person on the same day, it did not consider the reports had met its requirements under the EU for an acceptable attestation.
In particular, ASIC noted the report from Ernst & Young identified “a heavy reliance” on manual controls, which “have a higher inherent risk of failure due to human error or being overridden” in CFPL’s remediation program and compliance systems and processes.
“On the same day, CBA’s accountable person provided a written update to ASIC on the remediation program and work being done in relation to CFPL’s systems, processes and controls,” the corporate regulator said.
“Having regard to the concerns raised by the independent expert and the contents of CBA’s written update, ASIC considered that the notification did not meet ASIC’s requirements under the EU for an acceptable attestation.”
As a result, CFPL was required under the terms of the EU to immediately take all necessary steps to stop charging or receiving ongoing service fees from its customers and not enter into any new ongoing service arrangements with customers.
Existing clients will, however, continue to receive services under their ongoing service agreements, but will not be charged by CFPL.
ASIC noted it had included the requirement to stop charging fees in the EU to ensure fees-for-no-service conduct would not be repeated and to reduce any further risks to CFPL clients.
The regulator indicated CFPL had confirmed it is currently not charging service fees to existing or new clients, adding the fee suspension would remain in place until CFPL was able to satisfy ASIC it had remedied the current issues.
