An independent report by forensics firm KordaMentha has confirmed that the advice divisions of Commonwealth Bank (CBA) failed to implement consistent compensation programs under the regulator's surveillance.
Following the report, CBA will need to contact 2,740 clients to offer them up to $5,000 to review the advice they received.
The report looks at compensation schemes prior to the Open Advice Review program that started in 2014.
Specifically, it looks at Project Hartnett, which the bank put in place in 2008, and at the Compensation Program that started under the Australian Securities and Investments Commission (ASIC) enforceable undertaking to Commonwealth Financial Planning (CFPL) and Financial Wisdom (FWL) in 2011.
Despite being under ASIC's surveillance, in 3,452 of the 4,330 cases assessed in the Compensation Program, clients of advisers did not receive any letter notifying them that CBA was conducting an investigation into the advice they received.
For the remaining 878 clients, the decision to send the letter was made on a case by case basis "where the case manager needed to contact the client for further information to complete the review of their case."
KordaMentha found that in 393 cases CBA would either not name the adviser in the letter or say that the licensee was "in the process of reviewing" the advice provided without giving specific indication that there was a concern with the advice provided.
In other cases, clients were contacted with a letter headed "It's time to review your financial plan," with no reference to any issues with the advice provided or any investigations relating to the adviser.
The forensics firm also confirmed that no clients were given the offer of $5,000 to review their advice and most clients did not receive any letter saying they were entitled to compensation once CBA finished the review of their advice.
In contrast, under Project Hartnett, which was undertaken prior to the Compensation Program and was not under ASIC's surveillance, CBA did contact all clients affected, offered some of them (but not all) $5,000 to review their advice and were notified if they were entitled to compensation.
KordaMentha was appointed by ASIC in November 2014 to examine CFPL and FWL compliance under the limited Australian financial services licence (AFSL) conditions that the regulator imposed on the licensees.Author: Laura Millan
Source: Investor Daily