ASIC Ultimatum to Commonwealth FP on Fees For No Service

ASIC has issued notice to Commonwealth Financial Planning that it should immediately take steps to stop charging ongoing service fees to its clients.

The regulator’s action stems from what it says has been the failure of Commonwealth Financial Planning to provide it with “…an attestation and with an acceptable Final Report from the independent expert, both of which were required under a Court Enforceable Undertaking entered into with ASIC in April 2018 in relation to CFPL’s fees for no service conduct.”

As a result, ASIC says Commonwealth Financial Planning is now required under the Enforceable Undertaking to immediately take all necessary steps to:

  • Stop charging or receiving ongoing service fees from its customers
  • Not enter into any new ongoing service arrangements with customers

According to a statement released by the regulator, the Enforceable Undertaking, 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
  • 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.

ASIC noted that on 31 January 2019, Ernst & Young issued its second report under the EU, identifying further concerns it had 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 recommended CFPL address these issues within a further 120 days.

On the same day, 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.

Noting the concerns raised by Ernst & Young, together with the contents of CBA’s written update, ASIC said it 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 says this requirement will continue until CFPL is able to satisfy ASIC that all of the outstanding issues have been remedied.

CBA has been quick to respond to ASIC’s directive, announcing on the same day that:

“…from Friday 1 February 2019, CFP will not enter into any new ongoing service arrangements and has also commenced the process to stop charging ongoing service fees to existing customers until the conditions of the EU have been satisfied.”

CFP added that it expects to have completed the stopping of charging ongoing service fees for the vast majority of customers by 1 April 2019 and that its existing financial planning customers will continue to have access to all services that usually form part of their service arrangements, including the offer of an annual review.