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BFCSA: ASIC to feel heat over 'star' financial planner - Williams says: "wimpy group of bureaucrats" re Bankers

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Adele Ferguson Opinion SMH 7 May 2014

Opinion

 

Illustration: Rocco Fazzari.

Illustration: Rocco Fazzari.

The corporate regulator ASIC will face a grilling over its decision not to investigate a star financial planner who was operating at Meridien Wealth, a former authorised representative of Commonwealth Bank's Financial Wisdom arm.

 

Senator John Williams, who has spearheaded a Senate inquiry into the performance of ASIC, said he would raise Rollo Sherriff, Meridien Wealth and Financial Wisdom and its activities.

 

The Senate inquiry, which reports at the end of the month, will be under pressure to call for a reopening of the compensation payouts CBA made to clients of its other financial planning arm, Commonwealth Financial Planning.

 

It follows a joint investigation by Fairfax Media and Four Corners into the activities of former financial planner Sherriff, who operated out of Meridien Wealth, as well as the other financial planning division of the bank.

 

It comes as the spotlight turns to the Coalition's plans to wind back reforms to the financial planning industry, known as the future of financial advice (FOFA).

Industry Super Australia deputy chief executive Robbie Campo said in a statement the Fairfax Media and Four Corners investigations showed the imperative of retaining recently introduced consumer protection measures. ''This report shines a floodlight on why the FOFA consumer protection laws are so critical, and why they should be protected at all costs.''

Campo said efforts from the big banks to ''unpick'' the FOFA laws would be at the expense of Australians who rely on financial advice being in their best interests.

 

Meridien Wealth was sold in June 2012 and is now authorised by Premium Wealth Management, which is not aligned to any of the banks. The new team headed by David Adiseshan said he was exploring a class action with Shine Lawyers to ''seek justice for those who Commonwealth Bank's own compensation process [appears to have] failed''. Some of Sherriff's clients lost tens of millions of dollars due to inappropriate advice, which included double and triple gearing investments.

 

CBA said in a statement it had paid $7 million in compensation to some of Sherriff's clients. Some former clients said part of the settlement agreement included signing confidentiality agreements to receive compensation. Sherriff had hundreds of clients and managed more than $53 million of their money.

The Senate inquiry into ASIC's performance was sparked by ASIC's delayed response to information about a cover-up in Commonwealth Financial Planning, which saw hundreds, possibly thousands, of clients lose millions of dollars.

 

In its submission to the Senate inquiry, ASIC said the bank had paid out $51 million in compensation in its Commonwealth Financial Planning division. But the investigation found that some of this compensation was directed towards clients of Sherriff.

A statement from CBA on May 2 said the $7 million compensation payment ''is inclusive in the $51 million stated on page 9 of the Commonwealth Bank of Australia's submission to the Senate Economics Reference Committee dated 11 November 2013''.

Until now, the Senate had been told the $51 million was paid to clients of Commonwealth Financial Planning.

It means $44 million has been paid to clients in Commonwealth Financial Planning. CBA's submission to the Senate didn't mention the figure included compensation payments to Financial Wisdom clients.

 

Jeff Morris, a bank whistleblower, called on the inquiry to reopen the bank's compensation scheme to ensure all clients of Commonwealth Financial Planning were properly compensated. He said it was ''ludicrous'' that only 7000 client files were investigated by the bank, and of those, only 1127 clients received compensation.

 

The Fairfax Media and Four Corners investigation revealed that CBA had known about Sherriff's practices since the early 2000s, when it was forced to compensate a number of clients after receiving a number of complaints.

Then in 2004 the Financial Planning Association withdrew his status as a certified financial planner for five months. Sherriff and CBA's Financial Wisdom fought this disciplinary action.

 

CBA finally investigated Sherriff in 2010. Around the same time he was banned by the Financial Planning Association after he filed for bankruptcy.

The bank sent a breach report to ASIC in March 2010, followed by a second breach report eight months later, concerning Sherriff.

ASIC did nothing despite being fully aware at this stage of the shenanigans and cover-up that had gone on in the bank's other financial planning division.

In a statement ASIC said it had considered a range of factors before deciding not to take action against Sherriff, including his decision to leave the financial services industry. CBA said: ''Mr Sherriff's status is now a matter for ASIC.''

 

After the story broke at the weekend, phone calls and emails from former clients came in recalling their experiences. One said he suffered ''significant'' losses from the advice of Sherriff.

 

''We were contacted by Financial Wisdom and accepted a compensation amount that, while we felt was grossly inadequate to compensate us for our losses, was at least better than nothing. We had no idea that there were so many people in our position - so many worse off than us,'' he said.

 

Senator Williams said: ''I'm sick of hearing about people getting their nest eggs robbed. I expect the industry to be cleaned up and I want a regulator that is feared, not a wimpy group of bureaucrats.''



Read more: http://www.smh.com.au/business/asic-to-feel-heat-over-star-financial-planner-20140506-37ulj.html#ixzz30ykAwV7k

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Comments

  • doyla66
    doyla66 Wednesday, 07 May 2014

    The banks Lending departments must be breathing a sigh of relief,you can just hear the sighs "ah we dodged a bullet there,heats off us onto the FP's"

  • doyla66
    doyla66 Wednesday, 07 May 2014

    First the borrowers were blamed for doing the fraud. Plenty of paperwork and man hours went into trying to make that stick.
    Then it was the Brokers who were blamed for masterminding the massive mortgage fraud and even approving the loans illegally. In the end a tiny handful of brokers were found to have done the wrong thing with applications. Cross the brokers off the list. Everyone knows the Banks do the loan approvals.
    Now they're onto the Financial Planners. That's another distraction. Just like the Brokers there will be some rogue planners. But the rogue brokers were sitting in the Bank's offices, using the Bank's stationery etc, paid by the Bank. Put the spotlight back on the Banks that fostered this competitive culture at the expense of sound financial advice to clients.
    Look at how many homes were placed at risk and stolen by the combination of lax lending and self-interested financial "advice" e.g. Storm.
    How many more scapegoats will be found so that Australian regulators and politicians can avoid taking on the Banks for decades of crime and destructive conduct against borrowers they'd rather get rid of?
    How many years will it take to get through the blame game list before an Australian government gets honest and bites the bullet on Bank fraud and illegal financial practices?
    How many homes and farms will be lost during this time? How many lives and families destroyed by greedy selfish Banks?
    How many good Australians ground down by the Bank, reduced to living in cars, caravans, under bridges or couch surfing with relatives and friends?
    How does this aid the Australian economy or the image that our government would like the world to have of life in Australia?
    Their indifference to this suffering and dismissal of the causes in the interests of the blasted Banks is totally unacceptable.
    Royal Commission needed now. Freeze all fraud loans, pending investigation.

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