ASIC today released KordaMentha Forensic’s second report on past activities by Commonwealth Financial Planning Limited (CFPL) and Financial Wisdom Limited (FWL) to identify high-risk advisers and to review and compensate affected customers.
This report was required under additional conditions imposed by ASIC on the Australian financial services (AFS) licences of CFPL and FWL in August 2014.
The report finds that in 2012 CFPL and FWL took reasonable steps to identify which clients of a group of former advisers should have been included in a compensation program. It also finds CFPL and FWL took reasonable steps to identify other potentially high-risk advisers.
However, KordaMentha Forensic finds that CFPL and FWL did not have a reasonable basis for the processes they used to determine whether a group of the potentially high-risk advisers they identified should have been included in a compensation program.
As a result of KordaMentha Forensic's finding, CFPL and FWL are required to review client files of 17 advisers to determine whether the advisers should be included in a compensation program. If any of their clients are found to have lost money as a result of inappropriate advice, they will be compensated in a process overseen by KordaMentha Forensic.
KordaMentha Forensic's third report, the Compliance Report, will report in 2016 on its audit of whether CFPL and FWL have complied with their additional AFS licence conditions, including the implementation of advice review and client compensation activities arising from KordaMentha Forensic's first two reports.
Background
The AFS licence conditions and the expected work of the compliance expert were published in August 2014. [This media release was redacted on 6/12/2024 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]
ASIC appointed KordaMentha Forensic in November 2014 to examine CFPL and FWL’s compliance with new AFS licence conditions. [This media release was redacted on 6/12/2024 in accordance with ASIC policy - see INFO 152 Public comment on ASIC's regulatory activities.]
KordaMentha Forensic's Comparison Report was published on 23 April 2015 (refer: 15-083MR).
The purpose of REP 462 is to assess whether CFPL and FWL had a reasonable basis for the steps and processes they took in 2012 to:
- Identify which clients of a group of 15 former advisers were assessed in a compensation program.
- Identify other potentially high-risk advisers (known as potential at-risk representatives, or 'PARRs') who may have provided inappropriate advice.
- Determine if any of those PARRs ought to have been assessed in the compensation program.