ASIC has required a CBA licensee to stop charging fees for ongoing services after it failed to provide the corporate regulator with an attestation and with an acceptable final report from the independent expert.
Both documents were required from Commonwealth Financial Planning Limited (CFPL) under a Court Enforceable Undertaking (EU) entered into with ASIC in April 2018 in relation to CFPL’s fees for no service conduct, ASIC said in a statement.
As a result, CFPL is now required under 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.
ASIC said the EU, which commenced on 9 April 2018 and was varied on 20 December 2018, required CFPL to provide to ASIC by 31 January 2019:
- a final report by the independent expert, Ernst & Young, on whether CFPL had taken reasonable steps to remediate customers impacted by CFPL’s fees for no service conduct and on the adequacy of CFPL’s systems, processes and controls; and
- to provide an attestation from a Commonwealth Bank ‘accountable person’ under the Banking Executive Accountability Regime as to CFPL’s remediation program, and the adequacy of CFPL’s systems, processes and controls.
On 31 January 2019, ASIC revealed that Ernst & Young issued its second report under the EU, identifying further concerns regarding CFPL’s remediation program and its compliance systems and processes – including that there remains ‘a heavy reliance’ on manual controls, which ‘have a higher inherent risk of failure due to human error or being overridden’.
Ernst & Young then recommended CFPL address these issues within a further 120 days, it said.
On the same day, ASIC noted that 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.
Having regard to the concerns raised by the independent expert and the contents of CBA’s written update, ASIC then considered that the notification did not meet ASIC’s requirements under the EU for an acceptable attestation.
As a result, ASIC said its requirement under the EU that CFPL stop charging or receiving ongoing service fees and not enter into any new ongoing service arrangements, has been triggered.
ASIC included this requirement in the EU to ensure that if CFPL were not able to satisfy ASIC that the fees for no service conduct would not be repeated, CFPL would have to stop charging ongoing service fees so as to significantly reduce any further risk to clients.
It said existing clients will continue to receive services under their ongoing service agreements but will not be charged by CFPL.
Further, ASIC noted that it has received CFPL’s confirmation that it is complying with this requirement to stop entering into new ongoing service agreements and to cease charging existing clients fees under these agreements.
It added that the requirement will continue until CFPL is able to satisfy ASIC that all of the outstanding issues have been remedied. ASIC will be monitoring CFPL’s compliance with this obligation.
Finally, ASIC said it has been informed by CFPL that it is now in the process of transitioning its ongoing service model to one whereby customers are only charged fees after the relevant services have been provided, and will be monitoring CFPL’s transition to the new model.
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