ASIC says that on 13 April 2018, ASIC announced that it had accepted a Court-enforceable undertaking (EU) from Commonwealth Financial Planning Limited (CFPL) arising from its Fees For No Service conduct (18-102MR).
One undertaking required of CFPL was to appoint Ernst & Young (EY) to prepare an independent expert report that considered:
- whether CFPL had taken reasonable steps to ensure customers who should have received remediation in the 31-month period from 1 July 2015 to 31 January 2018 did receive that remediation. ASIC’s previous oversight of CFPL’s remediation had considered the period to 30 June 2015; and
- whether CFPL had put in place systems, processes and controls to meet its contractual obligations to customers who are paying ongoing service fees.
As set out in ASIC’s Regulatory Guide 100: Enforceable Undertakings, ASIC will make available a summary of an independent expert’s report in these circumstances to promote the integrity of, and public confidence in, the financial markets and corporate governance. A copy of the executive summary of EY’s report can be accessed via the Enforceable undertakings register.
EY’s findings on remediation
In relation to the remediation of CFPL customers, EY found that:
- for the periods 1 July 2015 to 31 May 2016 and 5 June 2017 to 31 January 2018, there was no evidence to suggest that CFPL had not taken reasonable steps to ensure that customers who should have received remediation did receive that remediation; and
- for the period 1 June 2016 to 4 June 2017 (Period 2), there had been a lower level of customer testing during this period and further work by CFPL was required. EY found that CFPL is in the process of taking reasonable steps to identify and remediate those customers who should have received remediation.
EY will re-assess and report on Period 2 in January 2019 once CFPL has undertaken additional remediation work for that period.
EY’s findings on CFPL’s controls environment
EY assessed whether CFPL had put in place adequate systems, processes and controls to meet its contractual obligations to customers who are paying ongoing service fees. EY found that there was nothing to suggest that those systems, processes and controls are not reasonably adequate to ensure that CFPL is able to discharge its obligations to its customers. However, EY noted that CFPL could make further improvements to address:
- a low level of control awareness within the business;
- a high prevalence of manual processes and controls;
- limitations on CFPL’s ability to analyse and report information for tracking and reporting of compliance centrally; and
- the sustainability of its manually intensive processes.
EY will assess and report on whether CFPL has addressed EY’s findings, through the implementation of systems and process improvements, in January 2019.
CFPL has requested an extension of time for EY to produce its final report and for CFPL to provide its senior executive attestation as required under the EU, to 31 January 2019.This extension of time will allow CFPL to undertake the additional work required in relation to Period 2 and to implement the recommendations made by EY to further improve CFPL’s systems, processes and controls.
CFPL is required by ASIC to submit a detailed plan setting out the specific actions that it will undertake to ensure that it addresses EY’s findings and recommendations. The EU will be amended to reflect this additional plan, the timing of the final report and senior executive attestation.
