Rogue former CFPL planner promoted so he would see “fewer clients”

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In an explosive appearance before the senate inquiry into ASIC’s performance yesterday, representatives of Commonwealth Bank of Australia (CBA) admitted that a planner facing allegations of fraud was subsequently promoted.

Commonwealth Bank wealth management group executive Annabel Spring told the inquiry that previous Commonwealth Financial Planning (CFPL) management actually promoted “rogue” financial planner Don Nguyen so that he would see fewer clients, reported the Sydney Morning Herald.

This was wrong, Spring acknowledged, before CBA general counsel David Cohen also admitted that the bank’s decision to allow Nguyen to return to work after the first investigation was a bad move.

This was just one of a series of mea culpas throughout the public hearing, which included appearances by former aggrieved clients of Nguyen, CFPL whistle-blowers, and accusations that subsequent ASIC investigations were a “staggering” failure.

The inquiry heard it took ASIC more than three years to act on the serious allegations facing “Dodgy Don” Nguyen, reported the Australian Financial Review.

He was eventually banned from offering financial services in 2011 after a group of whistle-blowers exposed his unethical conduct.

One of those was former CFPL planner Jeffrey Morris, who has slammed ASIC for its “slack regulatory regime”, and accuses the regulator of encouraging him to “walk away with what I had left”.

He said his submission to the senate inquiry was an attempt to “lay out the factual matrix to support these assertions, in particular to reveal the full extent of CFP[L]/CBA’s culpability in this matter and ASIC’s acquiescence in concealing same”.

Eventually an enforceable undertaking accepted by ASIC in October 2011 required CFPL to conduct a comprehensive internal review that uncovered "widespread misconduct".

At the time, ASIC banned seven financial advisers and secured $51 million of compensation for over 1,100 affected customers. On Monday, the regulator announced it had banned another former CFPL planner from practicing.

But Morris, along with a variety of other whistle-blowers, said the investigation process was a failure.

“The “Dodgy Don” affair didn’t come out of nowhere. Nor is it just a matter of ‘seven rogue planners’ as CFP[L] and ASIC would have it. There were far more than seven rogue planners but more importantly there was a system that nourished and protected them. How else did they survive? CFP[L] may have provided that environment but they did so under ASIC’s benevolent gaze,” he said in his submission.

Merilyn Swan, the daughter of an aggrieved former client of Nguyen, also appeared in front of the senate inquiry to criticise ASIC.

Despite ascertaining in 2008 through its extensive surveillance of CFPL that “the quality of advice and standards of practice in CFP[L] were unacceptable”, the regulator still elected not to make this public nor warn investors, she said in her submission.

“ASIC's incompetence has left rogue financial planners banned for very limited periods, free to ply their trade in the near future. ASIC abandoned and failed to protect the whistle-blowers who have sacrificed their careers, health, family and financial security to expose CFP[L],” Swan said. “CBA and CFP[L]'s senior management have not been called to account and continue to publically deny any knowledge of the activities within CFP[L] despite clear evidence to the contrary.”
ASIC chairman Greg Medcraft told the senate inquiry that the regulator had learnt its lesson from the event and has changed the way it deals with such situations, reported the Australian Financial Review.
It has welcomed recommendations by senators that all future reports given to it under enforceable undertakings be made public.
And in other dealings, ASIC has already “sought to be much more transparent and that will continue”, Medcraft said.
CBA top lawyer Cohen was also reprimanded in front of the inquiry for downplaying the systematic fraud within CFPL.
He was chastised for constantly blaming the failure on “inappropriate advice”, reported the Sydney Morning Herald.
However he vowed it would never happen again and admitted that “we should have moved more quickly”.


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