CBA Scandal and FOFA Reforms
Question 1
Summary of the CBA Scandal
In October 2008 ASIC was notified that CBA (Commonwealth Bank of Australia) had attempted to conceal the unlawful actions of one of their most senior financial planners, who had control of an estimated $300 million in investments. (Adele Ferguson, CBA Cover Up Misconduct by Rogue Financial Planner, 2013)
Through “extensive surveillance” on the conduct of CBA’s financial planning activities between 2007 and 2008, ASIC uncovered evidence which supported claims that the standards of CBA’s operations were “unacceptable”. (Williams, 2013) The planner, Don Nguyen, was believed to have created unauthorised investment accounts, forged signatures and overcharged fees. As a consequence, Mr Nguyen was banned from providing financial advice until 2018.
Contained within the fax was a detailed history of Mr Nguyen’s exploits, including an "extraordinary commonality in the risk profiles of the clients, whereby all, including the retired, the disabled and the unemployed, opted for aggressive high-growth [investment] strategies". (Adele Ferguson, 2013)
Through investigation it was also revealed that another key financial planner, Ricky David Gillespie, was also undertaking acts of forgery and overcharging of clients. Supporting these allegations was a CBA compliance report on Mr Gillespie dated October 16, 2008, whereby “issues of suspected irregularities” in a, later revised, total of fourteen signatures. (Adele Ferguson, 2013)
It was alleged that CBA staff had participated in the cover-up of the actions of Mr Nguyen and had ignored misconduct allegations by at least 25 clients and fellow bankers.
As a consequence the CBA has paid out $36.4 million in compensation to 725 clients, $23 million of which was paid to 202 of Mr Nguyen’s.
A) With reference to the FPA Code of Ethics and Profession Practice and using specific examples, discuss the professional issues arising from the CBA financial planning scandal.
As a
Summary of the CBA Scandal
In October 2008 ASIC was notified that CBA (Commonwealth Bank of Australia) had attempted to conceal the unlawful actions of one of their most senior financial planners, who had control of an estimated $300 million in investments. (Adele Ferguson, CBA Cover Up Misconduct by Rogue Financial Planner, 2013)
Through “extensive surveillance” on the conduct of CBA’s financial planning activities between 2007 and 2008, ASIC uncovered evidence which supported claims that the standards of CBA’s operations were “unacceptable”. (Williams, 2013) The planner, Don Nguyen, was believed to have created unauthorised investment accounts, forged signatures and overcharged fees. As a consequence, Mr Nguyen was banned from providing financial advice until 2018.
Contained within the fax was a detailed history of Mr Nguyen’s exploits, including an "extraordinary commonality in the risk profiles of the clients, whereby all, including the retired, the disabled and the unemployed, opted for aggressive high-growth [investment] strategies". (Adele Ferguson, 2013)
Through investigation it was also revealed that another key financial planner, Ricky David Gillespie, was also undertaking acts of forgery and overcharging of clients. Supporting these allegations was a CBA compliance report on Mr Gillespie dated October 16, 2008, whereby “issues of suspected irregularities” in a, later revised, total of fourteen signatures. (Adele Ferguson, 2013)
It was alleged that CBA staff had participated in the cover-up of the actions of Mr Nguyen and had ignored misconduct allegations by at least 25 clients and fellow bankers.
As a consequence the CBA has paid out $36.4 million in compensation to 725 clients, $23 million of which was paid to 202 of Mr Nguyen’s.
A) With reference to the FPA Code of Ethics and Profession Practice and using specific examples, discuss the professional issues arising from the CBA financial planning scandal.
As a
Bibliography: Adele Ferguson, C. V. (2013, June 1). CBA Cover Up Misconduct by Rogue Financial Planner. The Sydney Morning Herald. Adele Ferguson, C. V. (2013, June 1). Profit above all else: how CBA lost savings and hid its tracks. The Sydney Morning Herald. Adele Ferguson, C. V. (2013, June 1). Profit Above All Else: How CBA Lost Savings and Hid its Tracks. The Sydney Morning Herald. Australia, F. (2013). The Pillars of Our Profession. Code of Professional Practice. Sydney: Financial Plannin Association of Australia. Davey, G. (2010). Measuring Risk Tolerance: Avoid Industry-Standard Questionares. PFP Planner, 8-9. Government, A. (2011). Future of Financial Advice 2011. Commonwealth of Australia. McCrae, M. (2006). Profiling the Risk Attitudes of Clients by Financial Advisors: The Effects of Framing on Response Validity. Research Online. McCrae, M. (2006). Profiling the Risk Attitudes of Clients by Financial Advisors: The Effects of Framing on Response Validity . Research Online. Williams, R. (2013, August 3). Watchdog Admits Delay on CBA Warning. The Sydney Morning Herald. Investopedia, (2013), A Division of ValueClick, Inc. viewed 8 March 2013, http://www.investopedia.com/ Boomerang, (2013), Cartoon Network, viewed 8 March 2013, http://www.boomerangtv.co.uk/shows/the-flintstones/characters/fred-flintstone Forbes, (2013), viewed on 8 March 2013, http://www.forbes.com/lists/fictional15/2011/profile/bruce-wayne.html IMDb, (2012), viewd on 8 March 2013, http://www.imdb.com/character/ch0003031/bio