Hours before the final report from the Royal Commission goes public, Commonwealth Financial Planning has been ordered by ASIC to stop charging ongoing service fees. It is also barred from entering any new ongoing service arrangements with customers.
Commonwealth Financial Planning (CFPL) failed to provide ASIC with an attestation and acceptable final report from Ernst & Young as part of the Enforceable Undertaking entered in April 2018 and in regards to fees for no service.
As a result, CFPL is now required to immediately stop charging or receiving ongoing service fees from customers and must not enter any new ongoing service arrangements with customers.
ASIC said this requirement was included in the EU to ensure that the conduct would not be repeated in the event the business failed to comply.
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Existing CFPL clients will continue to receive services under their ongoing service agreements but will not be charged. This will "significantly reduce any further risk to clients", ASIC said.
The point of the final report was to determine whether CFPL had taken reasonable steps to remediate customers impacted by fees for no service conduct, as well as discuss the adequacy of the licensee's systems, processes and controls.
An attestation was also supposed to be provided from Commonwealth Bank's accountable person - as under the Banking Executive Accountability Regime - around CFPL's remediation efforts.
The attestation and final report were due on 31 January but were not delivered. Instead, Ernst & Young issued its second report; the first was delivered in July 2018.
ASIC said the second report raised concerns around CFPL's remediation program and compliance capabilities, saying there remains a heavy reliance on manual controls which "have a higher inherent risk of failure due to human error and being overridden."
Ernst & Young recommended CFPL be given a further 120 days to rectify the issues.
Further, a written update was provided by the accountable person as to the remediation program which did not meet the standard of the attestation required under the EU, thereby triggering the requirement to cease charging ongoing service fees.
ASIC said it has received confirmation from CFPL that it has ceased charging ongoing service fees and is not entering into any new arrangements.
"This 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," ASIC said.
Further, CFPL has informed ASIC it is currently transitioning to a new service fee model whereby customers are only charged after services have actually been provided.
To date, CFPL's remediation program for fees for no service has seen about $119 million repaid to customers.