Commonwealth Financial Planning Limited (CFPL) has failed to provide ob体育 with an attestation and with an acceptable Final Report from the independent expert, both of which were required under a Court Enforceable Undertaking (EU) entered into with ob体育 in April 2018 in relation to CFPL鈥檚 fees for no service conduct.
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聽its customers; and
- not enter into any new ongoing service arrangements聽with customers.
The EU, which commenced on 9 April 2018 and was varied on 20 December 2018, required CFPL to provide to ob体育 by 31 January 2019:
- a Final Report by the independent expert, Ernst &聽Young, on whether CFPL had taken reasonable steps to remediate customers聽impacted by CFPL鈥檚 fees for no service conduct and on the adequacy of聽CFPL鈥檚 systems, processes and controls; and
- to provide an attestation from a Commonwealth Bank聽鈥榓ccountable person鈥� under the Banking Executive Accountability Regime as聽to CFPL鈥檚 remediation program, and the adequacy of CFPL鈥檚 systems, processes and controls.
On 31 January 2019, Ernst & Young issued its second report under the EU, identifying further concerns regarding CFPL鈥檚 remediation program and its compliance systems and processes 鈥� including that there remains 鈥榓 heavy reliance鈥檕n manual controls, which 鈥榟ave a higher inherent risk of failure due to human error or being overridden鈥�.聽 Ernst & Young recommended CFPL address these issues within a further 120 days.聽
On the same day, CBA鈥檚 accountable person provided a written update to ob体育 on the remediation program and work being done in relation to CFPL鈥檚 systems, processes and controls. Having regard to the concerns raised by the independent expert and the contents of CBA鈥檚 written update, ob体育 considered that the notification did not meet ob体育鈥檚 requirements under the EU for an acceptable attestation.
As a result, ob体育鈥檚 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. ob体育 included this requirement in the EU to ensure that if CFPL were not able to satisfy ob体育 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. Existing clients will continue to receive services under their ongoing service agreements but will not be charged by CFPL.
ob体育 has received CFPL鈥檚 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. This requirement will continue until CFPL is able to satisfy ob体育 that all of the outstanding issues have been remedied. ob体育 will be monitoring CFPL鈥檚 compliance with this obligation.
ob体育 has also 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. ob体育 will monitor CFPL鈥檚 transition to the new model.
Background
Under CFPL鈥檚 remediation program overseen by ob体育, CFPL has to date reported to ob体育 that it has paid approximately $119 million to customers impacted by its fees for no service conduct.
A copy of the EU and an executive summary of Ernst & Young鈥檚 first report dated 9 July 2018 is available on ob体育鈥檚 Enforceable Undertakings register.
Editor's note
A copy of an executive summary from聽Ernst & Young鈥檚 second report (and final) dated 31 January 2019 is available on ob体育鈥檚 enforceable undertakings register.