Greg Medcraft said the trust ASIC put in CBA was misplaced. Photo: Michel O’Sullivan
Commonwealth Bank could be forced to broaden its compensation process for victims of bad financial advice after a Senate committee said a bigger compensation of $ 250 million would give investors assurance rogue planners had been weeded out.
In a Senate estimates hearing on Wednesday, ASIC chairman Greg Medcraft expressed his strong regret that the regulator had been misled by the bank over the compensation, which involved $ 51 million being paid to victims on an unequal basis.
He said the bank had failed to be upfront with ASIC in advising of its decision to change the process.
”I think it is fair to say that the level of trust and confidence was misplaced by us,” he said.
In a sign of a further breakdown in trust, the Australian Securities and Investments Commission has pledged to cancel the bank’s financial planning licences if the new conditions are not met.
It comes just weeks before a Senate inquiry is expected to release its report into ASIC’s handling of the CBA scandal. The bank has already been forced to reopen compensation to more than 4000 victims after it admitted customers were not given the same treatment.
On Wednesday, Senator Mark Bishop said investors would have greater confidence in the bank if it was forced to pay fivefold more.
”The CEO down to the most junior, junior clerk, they would have fixed it if the penalty was $ 250 million,” he said.
Mr Medcraft said he would consider the issue.
Mr Bishop asked ASIC to explain why it had allowed the bank to ignore 26 financial planners it considered high risk.
It followed the release of a letter from ASIC to CBA suggesting the regulator suspected the bank was turning a blind eye to rogue planners generating big sales.
Mr Bishop asked the regulator to explain why it had not stepped in after realising only 12 of the bank’s 38 high-risk representatives had their authorisation revoked.
”When all of these sins had been disclosed and identified, reviewed and assessed by ASIC – and correspondence sent to them identifying this – why were the other 26 still flogging financial products?” Mr Bishop asked.
He asked ASIC to consider extending the remediation program to all clients of financial advisers who had been identified as ”critical” risk, and to see whether the conditions could be extended to supervisors.
Senator John Williams asked ASIC why it had failed to investigate CBA’s star planner, Rollo Sherriff.
”He’s got a history of wrongdoing and bad financial advice … Why can someone do so wrong over such a period of time and just walk away?
ASIC said it pursued an investigation into Mr Sherriff but was unable to take formal action due to the fact he had left the industry.
ASIC senior executive Greg Kirk said it was also a matter of resources. ”It’s a question of which other matter would you drop,” he said.