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BFCSA: CBA should face cancellation of its Financial Planning licence. Here is WHY

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Which bank is on notice after ASIC probe into scandal?

 Business Date May 20, 2014 Adele Ferguson  smh


Commonwealth Bank could face suspension or cancellation of its two financial planning licences if it breaches new conditions imposed on it late last week by the corporate regulator.  In the latest embarrassment for the CBA over the financial planning scandal, ASIC slapped the new conditions on the bank's licences on the basis its compensation process for customers of dodgy CBA planners was inadequate.  Imposing licence conditions rather than entering an enforceable undertaking speaks volumes about how serious ASIC is taking the latest development.  The fact that CBA has agreed to these conditions and waive its right to challenge them at a hearing shows how serious it is taking the regulator on this matter.

 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.  Financial Wisdom was never subject to an enforceable undertaking because there was no whistleblower who went public with what was going on.  In the case of the CBA financial planning scandal, which resulted in the banning of eight planners who controlled hundreds of millions of dollars of clients' money, ASIC extracted a two-year enforceable undertaking in October 2011 on the bank's Commonwealth Financial Planning division.  That undertaking ended late last year with the blessing of ASIC, but after revelations about Financial Wisdom and the compensation process the corporate regulator has decided to ratchet it up and expand ASIC's scrutiny from CFPL to its other arm, Financial Wisdom, through new licence conditions.

ASIC will contract an independent expert to review the compensation process.  It comes less than a month before a Senate inquiry chaired by Senator Mark Bishop is due to report its findings into ASIC's performance as well as whether to reopen CBA's compensation even further.  Jeff Morris, the bank insider who blew the whistle at CFPL, said: ''The extraordinary thing about this is that the truth has only emerged as a result of media exposure of the Rollo Sherriff case, which in turn only came about because of the public exposure of the CFP scandal.''  He said out of the 7000 people compensated, at least 4000 need to be reviewed. ''So much also for the independent expert, the bank's auditors, who supposedly supervised the operation of the scheme,'' Morris said.  ''I suspect ASIC is also trying to pre-empt the findings of the Senate committee by announcing this limited reopening of compensation.

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Overseas Investors & the Commonwealth Bank

By Steve Keen | - 10:40 am |Debtwatch


On Thursday September 9th 2010, the Commonwealth Bank released a document on the Australian housing market, to support a tour that its senior executives are making to meet overseas investors. The press release for the document was as follows:

Australian Residential Housing

Sydney, 9 September 2010: Senior executives from the Commonwealth Bank of Australia (“the Group”) will soon be travelling overseas to meet with some of the Group’s offshore shareholders and other investors interested in Australia and the Australian banking sector.  In the light of recent commentary from a number of sources on the robustness of the Australian residential housing market, the Group (given its significant exposure to this section of the economy) anticipates that this will be an important issue for many of the investors it is scheduled to meet with.  In anticipation of these discussions, the Group has produced a presentation entitled “Australian residential housing mortgages: CBA mortgage book secure”. A copy of this document has been lodged with the ASX today. (Commonwealth Bank)

The document the press release refers to has a table (on page 4) comparing house price to income ratios in Australia with those from a number of coastal cities overseas--with the argument being that Australia's relatively high house price to income ratios are a by-product of the fact that Australia's major cities are all located on the coast. By the looks of this table, Australia's house prices are comparable to those elsewhere--Sydney's 6.2 ratio, for instance is below the 7 times ratio of its sister city in the USA, San Francisco.

Kris Sayce, of Money Morning is even more of a sceptic on Australian housing than I am, and his sceptic's eye spotted the fine print to this table: notice that there are 2 data sources, Demographia and UBS. A quick check of the Demographia data (check Schedule 1 on pages 31-37) shows that all the non-Australian numbers in that table come from Demographia, but none of the Australian numbers come from there. Kris then published a revised table where the Demographia numbers for Australia are substituted for the ones shown above--which by inference have to come from UBS. Kris observed that: In order to make their point, the CBA have used the Demographia numbers as a reference point for all the non-Australian cities, yet they’ve used the UBS numbers for the Australian cities. Why on earth would the bank do that? Simply because if they’d used the Demographia numbers it would draw exactly the opposite conclusion to the argument they’re trying to make. The fact is, they’ve conveniently grabbed the bunch of numbers that fits their argument and discarded the ones that don’t.


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