Finance Minister Mathias Cormann will on Friday reject a parliamentary inquiry’s key recommendation for a royal commission into the Commonwealth Bank’s financial advice scandal.
Investors will be able to identify bad apples in the financial planning industry through the creation of a public register which reveals penalties, bans and sanctions against rogue advisers.
The national register is the centrepiece of the government’s response to a five-month parliamentary inquiry into the Commonwealth Bank planning scandal which has rocked investor confidence in the financial advice industry.
But Finance Minister Mathias Cormann will on Friday reject the inquiry’s key recommendation for a royal commission into the scandal, concluding that the CBA’s revised compensation scheme is the appropriate response.
“We’ve confirmed our initial view that we are not going down the path of a royal commission and that the CBA’s open review program should be given a chance to work,” Senator Cormann told The Australian Financial Review.
In July, CBA chief executive Ian Narev was forced to broaden an initial $59 million compensation scheme for the bank’s 11,000 clients who received conflicted financial advice between 2003 and 2012.
Mr Narev also announced an independent review into the scandal to be headed by former High Court judge Ian Callinan. The Senate inquiry, which examined the CBA scandal as part of a broader probe into the performance of the Australian Securities and Investments Commission, also raised concerns about Macquarie Private Wealth, which has been forced to write to 160,000 clients to offer remediation.
Senator Cormann said that “instead of another inquiry. . . the most important focus must be on resolving any legitimate outstanding grievances from affected customers”.
However, the government will announce that it is not prepared to rely on industry to “self-regulate” through voluntary registers.
Westpac’s Bankers Trust has launched an adviser registry website called Adviser View, and last week, shadow treasurer Chris Bowen launched website Adviser Ratings at the Association of Financial Planners conference, which includes the names and details of 18,000 financial planners.
The government-backed register will be administered by ASIC and include information on an adviser’s education, work history, membership to professional bodies and whether they have received any sanctions or banning orders from the regulator.
Calls for a national register have grown amid concern that a handful of the rogue financial planners who provided conflicted advice at the CBA’s two financial planning arms continued working in the industry and were later employed by another major bank.
REGISTER WILL BE OPERATING BY MARCH
The national register, expected to be up and running by March next year, will cost around $5 million and be funded by increasing the current lodgement fee for an Australian Financial Services licensees by $5 to $44.
“This register of financial advisers will enable investors and employers to verify the credentials of a financial adviser and be confident that they are appropriately qualified and experienced,” the government will announce on Friday. The Senate report into the CBA handed down in July included 61 recommendations and was described as “a wake-up call” for ASIC.
The recommendations included beefing up of the watchdog’s powers to immediately ban planners suspected of “egregious misconduct causing widespread harm to clients” and to strengthening whistleblower laws to encourage insiders to come forward. ASIC chairman Greg Medcraft has revealed he has just 20 surveillance staff to oversee an estimated 54,000 financial advisers.
But he told a Senate hearing on Wednesday the regulator had been granted approval to draw from a special enforcement fund to cover the cost of a crackdown on the financial planning arms of the big four banks plus Macquarie and AMP.
Mr Medcraft has also been lobbying the government to introduce a national exam for financial planners and is calling for a user-pays funding model of regulation.
But his campaign for tougher penalties for corporate criminals hit a roadblock on Wednesday, after he was forced into an embarrassing backdown over his description of Australia as a “paradise” for white-collar criminals after a query from Senator Cormann.
“I correct that. Basically the point is that we want to make sure we don’t become a paradise,” he later clarified.
Senator Cormann said ASIC needed to enforce the current laws. “If the government is presented with persuasive evidence and advice that there is a problem with the level of penalties we would of course act on that.”