Watchdog 'failed' investors
A royal commission could be launched into the corporate watchdog and the Commonwealth Bank after a cross-party Senate committee found both had failed thousands of mum-and-dad investors.
The committee, headed by WA Labor senator Mark Bishop, found the Australian Securities and Investments Commission could not be trusted to properly deal with problems discovered in the bank's Commonwealth Financial Planning Ltd arm.
In stinging criticism, the committee accused the bank of "deliberately playing down the seriousness and extent of problems" with its financial advice company in a bid to avoid scrutiny by ASIC.
The inquiry started as an investigation of the performance of ASIC but broadened to take in claims the bank had failed customers who were hurt by a group of advisers within CFPL.
The bank has paid out $51 million in compensation to 1127 customers.
Senator Bishop said the bank's credibility had been compromised by the actions with CFPL and then its efforts to clean up the mess.
ASIC had also been compromised to the point its actions in dealing with the bank needed fuller investigation.
"Given the seriousness of the matter, the egregious nature of the conduct, the potential number of clients affected and the lack of transparency around the compensation process, a royal commission should be established," Senator Bishop said. "Firms need to know they cannot turn a blind eye to unscrupulous employees who do whatever it takes to profit at the expense of vulnerable clients."
He was backed by Nationals senator John Williams who said he had deep concerns about Macquarie Private Wealth.
Apart from royal commission calls, the committee made another 60 recommendations.
They include big increases in penalties that could be meted out by ASIC to financial advisers that breach the law. It backed an overhaul of directors' breach of duties penalties under the Corporation Acts.
An "office of the whistleblower" would be created within ASIC and the watchdog would set up a pool of independent experts to get advice from when it faced issues within particular companies.
The Commonwealth Bank said it rejected Senator Bishop's claims while reiterating its apology for the events at CFPL. It said the investment arm was now a "significantly transformed business".
