Commonwealth Financial Planning Limited:
What went wrong at CFPL and why?
One of the committee's major concerns during this inquiry was the
misconduct by financial advisers and other staff at Commonwealth Financial
Planning Limited (CFPL), part of the Commonwealth Bank of Australia Group
(CBA), and what some regard as ASIC's failure to respond to reports of this
misconduct in a timely and effective manner.
This chapter provides an overview of the CFPL case, an analysis of what
went wrong at CFPL and why, and a critical appraisal of the CBA's
characterisation of the misconduct at CFPL as 'inappropriate advice' to
Other issues raised by the CFPL matter are explored in the next three
chapters. Chapter 9 provides:
an overview of the surveillance project that ASIC undertook in
relation to CFPL in 2007–08, and an assessment of the Continuous Improvement
Compliance Program (CICP) that was implemented as a result in April 2008; and
a review of ASIC's response to reports of misconduct at CFPL,
including the disclosures made by CFPL whistleblowers.
Chapter 10 assesses the adequacy and effectiveness of the enforcement
actions taken by ASIC in relation to the CFPL matter including, among other
things, the enforceable undertaking from CFPL that ASIC accepted in October
2011. Chapter 11 examines the integrity of the client file reconstruction
and compensation process put in place by CFPL/the CBA. The committee's
conclusions on the CFPL matter are contained in Chapter 12.
The committee has received evidence from various parties involved in the
CFPL matter including CFPL clients, a CFPL whistleblower, the CBA and ASIC.
In addition to submissions and oral evidence from ASIC and the CBA, the
committee has published submissions from former CFPL clients, family members of
former CFPL clients, or representatives of CFPL clients, who, in addition to
being highly critical of the CBA, in varying degrees argued that ASIC failed to
prevent the misconduct at CFPL or respond appropriately when the misconduct
became known. Three of these submitters—Mrs Jan Braund, Ms Merilyn Swan
and the law firm Maurice Blackburn—also provided oral evidence to the committee
on 10 April 2014. In addition, the committee received a number of
submissions and oral evidence from one of the CFPL whistleblowers, Mr Jeffrey
Morris, that was highly critical of the CBA and ASIC's handling of the matter.
In mid-2010, public reports emerged of problems affecting the quality of
financial advice being provided to CFPL clients. While the exact nature and
extent of these problems is contested (and explored further below), it is
accepted by all parties that multiple CFPL advisers failed to meet required
compliance standards and provided advice that was irresponsible, self-serving
and incidental to client interests. The precise timeframe of this adviser
misconduct remains unclear, but in terms of the individual CFPL advisers
subject to ASIC enforcement action, most of the misconduct appears to have taken
place between 2006 and 2010. For one adviser, Mr Christopher Baker, ASIC
found compliance failures from 1 March 2005; for another,
Mr Jade Zaicew, ASIC suggested that misleading and deceptive conduct
took place between August 2011 to May 2012.
A chronological summary of the CFPL matter is provided below in Table
Table 8.1: Chronological summary of the CFPL
ASIC commenced a surveillance
project in relation to CFPL.
ASIC notified CFPL of its
concerns resulting from the findings of its surveillance project.
CFPL implemented the Continuous
Improvement Compliance Program in response to ASIC's concerns.
Mr Don Nguyen, a CFPL
financial adviser, was suspended from CFPL for compliance failures.
15 October 2008
Mr Nguyen returned to CFPL as
a senior planner, in effect a promotion from his position prior to
30 October 2008
The CFPL whistleblowers faxed
an anonymous report to ASIC (signed 'the three ferrets'), reporting Mr
Nguyen's conduct and a 'high level' cover-up of that conduct at CFPL.
10 November 2008
The CFPL whistleblowers sent
their first follow-up email to ASIC. In subsequent exchanges in November 2008
and February 2009, ASIC indicated that the issue was still 'under
Frustrated by ASIC's apparent
inaction, the CFPL whistleblowers provided their information to a journalist
from Investor Daily. Articles about the CFPL matter were published in Investor
Daily on 18 May 2009, 25 May 2009 and 22 June 2009. The article on
25 May named Mr Nguyen.
2 June 2009
Mr Jeffrey Morris, one of the
CFPL whistleblowers, met with CBA Group Security and reported his knowledge
about Mr Nguyen and the management 'cover up'.
4 June 2009
The CFPL whistleblowers sent
an anonymous email to CBA senior management (the 'Mallord' email), providing
information on Mr Nguyen and the management 'cover up'.
29 June 2009
Mr Nguyen met with CFPL managers
and was told to resign.
6 July 2009
Mr Nguyen formally resigned,
citing ill health and denying any wrongdoing.
27 July 2009
The CBA filed a breach report
with ASIC regarding Mr Nguyen.
24 February 2010
The CFPL whistleblowers made
their first visit to ASIC. Mr Morris later wrote they 'marched in ASIC's
door...to demand action'.
24 March 2010
ASIC issued notices to CFPL
to hand over documents relating to Mr Nguyen. Mr Nguyen's client list and
audit trail data was required immediately, and his client files were required
by 9 April 2010.
24 March 2010
Project Hartnett, the CFPL's
process for determining compensation payable to clients of Mr Nguyen and,
later, clients of adviser Mr Anthony Awker, began.
19 July 2010
ASIC referred a brief on Mr
Nguyen to a delegate for consideration of a banning action.
21 July 2010
CFPL gave ASIC a commitment
to remediate former clients of Mr Nguyen.
3 November 2010
CFPL commenced a remediation
project for former clients of Mr Nguyen.
3 March 2011
ASIC banned Mr Nguyen from
providing financial services for seven years.
25 October 2011
CFPL entered into an
enforceable undertaking with ASIC.
19 March 2012
Mr Nguyen's banning order was
upheld by the Administrative Appeals Tribunal (AAT) on appeal.
25 October 2013
The independent expert
engaged in relation to the enforceable undertaking, PricewaterhouseCoopers,
provided ASIC with its final report.
26 November 2013
ASIC accepted the final
report of the independent expert, formally bringing the enforceable
undertaking between CFPL and ASIC to a close.
The misconduct of individual CFPL financial advisers
In its first written submission on the CFPL matter, ASIC outlined the
various aspects of the conduct of individual CFPL advisers that most concerned the
regulator and were the subject of regulatory action. These were:
failing to have a reasonable basis for advice;
failing to provide Statements of Advice;
making statements that were false or misleading in a material
making forecasts that were misleading, false or deceptive;
failing to make reasonable inquiries before implementing advice;
providing asset allocation advice far above that recommended for the
client's risk profile; and
failing to complete 'financial needs analysis' documentation.
ASIC has taken enforcement action against eight individual CFPL
Five of these advisers were banned by ASIC from providing financial services,
and three removed themselves from the industry under an enforceable
The advisers banned from providing financial services were:
Mr Don Nguyen—banned for seven years on 3 March 2011, with the
decision upheld by the AAT on 19 March 2012;
Mr Anthony Awkar—permanently banned on 19 April 2012;
Ms Jane Duncan—banned for three years on 19 April 2012;
Mr Rick Gillespie—permanently banned on 30 October 2012;
Mr Jade Zaicew—banned for seven years on 4 April 2014.
The advisers who removed themselves from the industry for a defined
period under an enforceable undertaking were:
Mr Simon Langton—two years, from 9 January 2012;
Mr Christopher Baker—five years, from 3 April 2012; and
Mr Joe Chan—two years, from 1 June 2012.
A large proportion of the evidence received by the committee in relation
to the CFPL matter concerned one CFPL adviser in particular, Mr Don Nguyen.
Mr Nguyen was an authorised representative of CFPL between
1 October 2003 until his resignation on 6 July 2009. His
conduct was the subject of a series of CFPL whistleblower reports to ASIC, the
first of which was made anonymously on 30 October 2008 after Mr
Nguyen returned to CFPL on 15 October 2008 following a period of suspension for
suspected compliance failures. As noted above, Mr Nguyen was banned by
ASIC from providing financial services for seven years on
3 March 2011.
CFPL's sales-based culture
While Mr Nguyen's conduct was particularly egregious, it should be noted
that it is broadly agreed—by ASIC, the CBA and Mr Morris—that the problems at
CFPL did not start or end with Mr Nguyen. Rather, the problems that ASIC
identified at CFPL went beyond any single adviser or group of advisers; at the
heart of these problems were systemic and organisation-wide failures within CFPL.
In one of its submissions, ASIC reports that it had concerns about the:
...adequacy of CFPL's processes and controls, its dealing with
misconduct by its representatives in a consistent manner, its capacity for
early identification of irregularities in its advice process, the adequacy of
controls over its clients' records and the consistent application of its
complaints handling and internal dispute resolution processes.
Mr Morris told the committee that Mr Nguyen and other non-compliant
advisers would not have been able to operate as they had were it not for the
'incredibly loose, non-compliant culture' at CFPL. He described an aggressive
sales-based culture wherein advisers pushed clients into inappropriately
high-risk products both to earn bonuses and 'avoid getting the sack'.
Maurice Blackburn provided a similar assessment based on the experiences
of former CFPL clients that it represented in various civil actions. Its work
on behalf of these clients revealed a toxic, 'boiler room'-like environment at
CFPL, where advisers chasing commissions would systematically target clients in
conservative positions, selling them into high-risk products that were
inconsistent with their conservative risk profiles. Maurice Blackburn explained
that in order to do this, the advisers needed
to circumvent processes that would usually 'work by putting some downward
pressure on those sorts of extreme sale practices'. These processes included
the preparation and maintenance of Financial Needs Analysis and Statements of
Maurice Blackburn explained to the committee that almost all of its 30
clients were retirees, who had originally been in conservative investments.
These clients had been:
...convinced by Mr Nguyen to transfer their moneys into much
riskier and high-risk investments and they lost substantial moneys. The most
stunning example we had was a couple in their mid-80s who had a $5 million
portfolio and lost $2½ million of that. They were conservative investors and
they were convinced by Mr Nguyen through a process that was completely flawed.
It involved lots of cutting and pasting of documents, almost all of which were
not completed by them or sighted by them.
Interestingly, in a 2007–08 surveillance project carried out by ASIC in
relation to CFPL (which is discussed in the next chapter), ASIC appeared to
have identified the relationship between the amount of revenue a particular
adviser was bringing in and the CFPL's tolerance of non-compliance on the part
of that adviser. On 29 February 2008, ASIC wrote to the CFPL
that it had found:
...that of the 38 representatives who were rated Critical [by
the CBA's Risk Matrix system], CBA revoked the authorisation of only 12
representatives. We do not know why the remaining representatives continue to
retain their authorisations. There appears to be some correlation between the
amount of revenue generated by the representative and CBA not revoking an
On 5 May 2014, the ABC's Four Corners program revealed
documentation showing that in 2006 Mr Nguyen was, in fact, assessed by the CBA
as being a 'Critical Risk' by its compliance team.
This information would appear consistent with the suggestion in ASIC's 2008
letter that CFPL/the CBA appeared willing to turn a blind eye to non-compliant
advisers, so long as they were earning significant revenue for the company (as
Mr Nguyen was).
In his submission, Mr Morris wrote that Mr Nguyen 'was widely known as
"Dodgy Don" for years before the events of 2008–09'. That Mr
Nguyen's 'dodgy' conduct was at once widely known and generally tolerated was,
Mr Morris argued, indicative of a culture at CFPL/the CBA that was driven by
'sales and a metricated short term remuneration/bonus structure at all
levels and where ethics and propriety at best take a back seat'.
The abovementioned findings of ASIC's 2007–08 surveillance project, together
with Four Corners' revelations about Mr Nguyen's 2006 risk assessment,
appear to firmly support Mr Morris's assessment in this regard.
Allegations of forgery
One of the most serious allegations made against the CBA during the
inquiry was Mrs Jan Braund's claim that the bank had either ignored or sought
to cover up Mr Nguyen's misuse of her signature to facilitate
product-switches and other transactions that she had not authorised.
Mrs Braund provided the committee with evidence demonstrating that a
number of these transactions took place when she and her husband were overseas,
when it would have been physically impossible for her to sign the transaction
authorisations. A number of these transactions were apparently made using a
copy of Mrs Braund's signature. Mrs Braund emphasised that she had never given
Mr Nguyen permission to use her signature, and tabled a statutory
declaration to that effect during her appearance before the committee.
According to Mrs Braund, the CBA had refused to take any action in
relation to her allegations that Mr Nguyen used a photocopy of her signature to
invest against her profile.
The CBA responded that it had in fact investigated Mrs Braund's claims of
forgery, and accepted that she could not have put several of the signatures on
authorising documents. The bank nonetheless maintained that the findings of its
investigation of Mrs Braund's claims were inconclusive, and did not warrant
a report to the police:
We had our security team investigate those issues. Our
security team is a team comprised, in many cases, of ex-police officers, so
they do have experience in these types of issues. We were not able to
conclusively find evidence that we felt would be sufficient to lead to a brief
to go to the police. I would draw a distinction there, because in other cases
of advisers we did actually find clear evidence of forgery and we did report
the matter to police and the police looked into the issues. In this particular
case with Mr Nguyen, we were not able to form a conclusive view that there had
The CBA told the committee that Mrs Braund's allegations regarding the
misuse of her signature to facilitate an unauthorised 'switch back' of funds to
managed investments in October 2008 was 'based on her misunderstanding of
circumstances'. According to the CBA, Colonial First State 'failed to execute'
Mrs Braund's October 2008 request that her investment be switched from
managed investments into cash. Therefore, rather than a 'switch back' taking place
using her forged signature,
the CBA claims that the original switch to cash never actually took place:
[A]s Mrs Braund's original October 2008 instruction had not
been executed, there was no 'switch back' transaction at all. Therefore no
'switch back' document came into existence and as a result Mrs Braund's
signature was not used.
The CBA also addressed Mrs Braund's allegations regarding the use of her
photocopied signature on a number of switch and withdrawal requests from 2006
to 2008 at times when she was overseas. As to why the misuse of Mrs Braund's
signature on these occasions did not result in a report to the police, the CBA again
argued that it 'found insufficient evidence to support a report to the police'.
Specifically, the CBA told the committee that Mrs Braund had indicated
that Mr Nguyen had informed her that he had photocopied her signature
(although the bank did not directly state that Mrs Braund had authorised
Mr Nguyen to use that signature). CFPL's investigation subsequently found
that four signatures on withdrawal and withdrawal/switch requests appeared to
be identical, but that all withdrawals had been deposited directly into the
Braunds' non-CBA bank account:
CFP believes it is likely that the Braunds requested these
four withdrawals and the instructions were submitted by Mr Nguyen or someone
else at CFP to execute these instructions on behalf of the Braunds while they
were overseas and not able to sign the forms themselves. CFP believes this was
done in order to facilitate access to their funds while the Braunds were
overseas. CFP has been unable to verify its belief with Mrs Braund because she
has refused to meet with CFP.
CFP also investigated whether there was any advantage
obtained by any staff member in the execution of these instructions. No benefit
(payment, credit, bonus) was earned or received by any CFP staff member in
relation to a withdrawal or switch on the Braunds' accounts involved in these
In addition, the CBA noted that there were certain difficulties in Mrs
Braund's case which weighed against making a report to police. They included: the
uncertainty around whether Mr Nguyen had himself affixed Mrs Braund's
signature to the transaction requests; no benefit was to be gained by Mr Nguyen
or any other CFPL employee from affixing Mrs Braund's signature to these
requests; and as Mr Nguyen was no longer employed at CFPL it was not possible
to question him about the matter.
While the CBA did not make a report to the police regarding Mrs Braund's
case, the CBA told the committee that it had, in the past, referred advisers to
the police where it had found evidence of forgery. However, in the Nguyen case and
in the case of Mr Gillespie, CBA investigations had not revealed the hard
evidence needed to make a report to the police. Still, the CBA assured the
committee that it would not hesitate to report these advisers to the authorities
if it acquired the necessary evidence:
We have nothing to hide about this. If there was forgery
perpetrated then we have nothing to hide. There is no gain. It is a criminal
offence. It should be reported to the police, as we have done in the past and
we would be prepared to do so in the future.
ASIC's evidence to the committee would tend to support the CBA's claim
that it was willing to report forgery to the police when it had evidence
available to make such a report. Mr Greg Kirk told the committee that his
understanding was that the CBA had:
...referred at least one matter to the police—not Mr Nguyen but
a Mr [Anthony Awkar]—that involved forgery. Mr [Awkar] was banned by us,
in part using the evidence about the forgery. I think the police determined not
to take the case further because they did not think they could prove that to a
criminal standard in a court.
In addition to being critical of the CBA's apparent inaction in relation
to her allegations of forgery, Mrs Braund also told the committee that
ASIC had failed
to take any action in relation to her claims.
Discussing the forgery allegations, ASIC also told the committee that it would
be unlikely to prepare a brief for the DPP in relation to signature fraud
simply on the word of a complainant. Even if it were clear that a signature was
not the signature of the complainant:
...proving who actually did put the signature on [a form] is
another question and we need to prove that beyond reasonable doubt. So it is
not as simple as taking it straight to the DPP or indeed taking it to the
Don Nguyen's promotion and allegations of a management 'cover up'
As noted above, Mr Nguyen was suspended from CFPL in September 2008 for
suspected compliance failures. According to Mr Morris, Mr Nguyen's
suspension had been prompted by a number of developments, namely that: Mr
Nguyen had failed a file audit; client complaints were 'pouring in' as Mr Nguyen's
poor advice was exposed by the onset of the global financial crisis; Mr Nguyen
had been caught paying $50 'backhanders' to Chatswood Branch staff to give him
client details directly; and he had been caught 'red handed' by a compliance
manager defrauding CommInsure 'by tendering $5,000 invoices for financial
advice that was never provided'.
An internal CFPL memo provided by Mr Morris suggests Mr Nguyen was
suspended in August 2008 'as a result of an issue raised with respect to an
advice fee for a client in receipt of a trauma claim'.
This advice fee is evidently the CommInsure fraud referred to by Mr Morris.
Despite what would appear to have been overwhelming evidence of misconduct
on Mr Nguyen's part, on 15 October 2008 Mr Nguyen not only returned
to work at CFPL, but was promoted to the position of senior planner.
Mr Morris and the other CFPL whistleblowers alleged in their anonymous fax
to ASIC on 30 October 2008 that Mr Nguyen's promotion was part
of a management conspiracy
to avoid paying client compensation. The amounts involved, the whistleblowers
suggested, ran into the tens of millions—'enough to cost all the managers
involved their jobs'. The whistleblowers explained that by promoting
Mr Nguyen, CFPL management was able to ensure he had access to his
clients, which was necessary to allow him 'to dupe and discourage clients from
pursuing their complaints'. The whistleblowers further alleged that CFPL
management realised that if they sacked Mr Nguyen, this would place the
CFPL in a 'very poor position'
to defend compensation claims by his clients. Conversely, promoting Mr Nguyen
would 'tend to strengthen their position'.
Mr Morris explained that, following Mr Nguyen's suspension from CFPL in
September 2008, he personally witnessed the workings of a CFPL management
conspiracy to cover up Mr Nguyen's wrongdoing. His version of events, if
accurate, would indicate a coordinated and systematic effort by CFPL/the CBA to
mislead Mr Nguyen's clients and discourage them from pursuing compensation
claims, and is worth quoting at length:
Contrary to what was said earlier [by CBA representatives
appearing before the committee on 10 April 2014], [CFPL management]
knew Nguyen had done all the things he was accused of; he was caught
red-handed. They announced he had been suspended for fraud and he would not be
coming back. The trouble is that, with the GFC going on, they needed a planner
to hose down Nguyen's clients who were complaining. They offered his client
book to another planner. They gave him his phone. After a week of this, of all
the client complaints ringing up, and being told by the complaints people that
they were not going to do anything for them, he threw the phone back and he
said he would not have anything to do with it.
So they brought Nguyen back and reinstated him and promoted
him so that he could fob off the clients and discourage them from making
complaints about what had happened. At the same time, they had done a file
review and they had found photocopied risk profiles in his fact files. The risk
profile is probably the most critical thing a planner does. Nguyen just gave
everybody more or less the same risk profile. He got to the point where he just
photocopied them. They found this in 2008, and he should have been dismissed at
that point. But they brought him back for two reasons. One was to hose down the
client complaints. The other was to sanitise his files. They gave him a second
assistant to help sanitise the files. I saw him there, day after day, with
liquid paper going through changing things in the fact files.
The CFPL whistleblowers alleged that while the compliance team at CFPL
had recommended that Mr Nguyen be sacked for his misconduct, the team had
evidently been warned to 'back off' by CFPL/CBA management 'on a sufficiently
senior level'. The whistleblowers further alleged that CFPL's internal
complaints handling area:
...also appears to have been got at (again at a senior level,
probably above Commonwealth FP) and agreed to deal with complaints about Don
Nguyen on a purely individual basis, just looking at what is in front of them
for each case and ignoring the wider systemic issues of which they are well
On 5 May 2014, Four Corners broadcast a handwritten
document by a CFPL compliance officer on 24 November 2008 that read in part:
'If pulled Don out, huge compensation issue for CFP—Better to work for client's
best interests to resolve all issues'.
This document, which Mr Morris has since provided to the committee, would
appear to support the whistleblowers' claims that Mr Nguyen was promoted with a
view to minimising any compensation costs for the CBA.
While the CBA conceded that the decision to promote Mr Nguyen was wrong,
it also suggested that the reasoning at the time was that he would be subject
to closer supervision in his new role:
In hindsight, it is very clear to us that he should not have
been promoted. The reasoning at the time seems to have been that in this more
senior position he would actually see fewer clients. He would supervise but he
would actually physically see fewer clients. He was also relocated to
Chatswood, where he would be under the closer supervision of his manager.
Clearly, that was the wrong decision in view of the investigative reports and
as events unfolded, but it was the decision taken at the time. Furthermore, I
think at the time the full extent of his misconduct was clearly not known; but,
with the benefit of hindsight, it was the wrong decision.
The CBA made no attempt to defend the decision to promote Mr Nguyen.
It should nonetheless be noted that if CFPL management genuinely believed
that Mr Nguyen would see fewer clients as a senior planner, this evidently
did not work. Ms Swan, for instance, reports that her parents met with Mr
Nguyen twice in November 2008.
A report by Adele Ferguson and Chris Vedalgo in the Fairfax press
suggested that upon Mr Nguyen's return from suspension in late 2008 he was
placed under supervision and his Statements of Advice were vetted before being
provided to clients. Ms Ferguson and Mr Vedalgo report that on
22 December 2009, Mr Nguyen was notified that his advice to
clients would no longer need to be vetted before being sent to clients.
This report, if accurate, would suggest that not only did Mr Nguyen remain
in direct contact with clients as a senior planner, but also that any heightened
supervision to which he was subject following his return from suspension was
Asked why the CBA did not make a breach report to ASIC when Mr Nguyen
was first suspended in September 2008, the CBA told the committee that the
findings from the investigation at the time were 'inconclusive'. While
acknowledging 'the decisions made around' the investigation of Mr Nguyen
in September 2008 and his subsequent return to work were 'the wrong decisions',
the CBA did not directly concede that it should have made a breach report to
ASIC at the time.
CBA's actions between Mr Nguyen's promotion and his forced resignation
According to Mr Morris, between Mr Nguyen's return from suspension in
October 2008 and his forced resignation in mid-2009, Mr Nguyen set about
sanitising client files 'literally liquid paper bottle in hand, with a little
help from his two servicing planners'.
At the same time, Mr Nguyen continued to mislead and deceive clients. This
included an episode in late 2008 where Mr Nguyen missed the team's Christmas
...he and his two servicing planners were busy trying to stitch
up a 93 year old with $1.6 million to invest for a $32,000 [2% flat]
advice fee. It goes without saying that no financial planner with a shred of
decency to them would have contemplated acting this way.
Frustrated by what they regarded as a CFPL management cover-up of
Mr Nguyen's activities (and, as discussed in the next chapter, by ASIC's
failure to act on their information) in May 2009 the CFPL whistleblowers
provided their information to an Investor Daily journalist. The
whistleblowers reasoned that:
...going public would force CBA to act and go through the farce
of a 'voluntary disclosure' to ASIC of what they had long known. That hot
potato dumped in their lap should in turn force ASIC [to] act.
Articles based on the whistleblowers' information were published by Investor
Daily on 18 May 2009, 25 May 2009 and 22 June 2009. The article on 25 May
named Mr Nguyen. Shortly after the publication of the 25 May article, Mr Nguyen
was suspended from work. Mr Morris, meanwhile, reported his allegations
regarding a CFPL management cover-up of Mr Nguyen's conduct to CBA Group
Security on 2 June 2009. On 4 June 2009, the CFPL whistleblowers also
sent an anonymous email to CBA senior management (subsequently referred to as
the 'Mallord' email, for the name that appeared in the sender's address) in an
attempt to ensure the bank had no reason not to act.
Mr Morris suggests that the whistleblowers' actions were 'the direct cause of
Nguyen's forced "resignation" on 2 July 2009 and CBA's filing
of a Breach Report with ASIC regarding Nguyen on 27 July 2009'.
Mr Nguyen resigned from CFPL on 6 July 2009, while still on
suspension. In his letter of resignation, he denied any wrongdoing and
cited ill health as the reason for resigning.
Mr Morris alleged that Mr Nguyen was allowed to resign and receive payments
from a generous CommInsure income protection policy (worth
75 per cent of his former salary) as a pay-off for not revealing what
CFPL management had encouraged him to do since his first suspension.
Asked to what extent the CFPL breach report to ASIC regarding
Mr Nguyen was prompted by the Investor Daily articles, the CBA told
In reviewing the situation at that time, that was one
contributing factor but not the sole one. There was already an investigation
taking place and the information that actually came out allowed us to have some
more information to follow up. So it was not the sole issue but it led to a
combination of pieces of information.
According to ASIC's submission, when CFPL lodged its breach report
regarding Mr Nguyen it indicated that it had conducted a review of 16 of Mr
Nguyen's client files after receiving 'a couple of major complaints from
clients'. The breach report, it implied, was prompted by this file review.
The CBA did not refer to the internal disclosures of the whistleblowers, or the
publication of the Investor Daily articles, as factors contributing to
the decision to prepare the breach report.
CBA's characterisation of misconduct at CFPL as 'inappropriate advice'
In its written submission, the CBA acknowledged that 'in the past a
small number of its advisers, none of whom remain with CFPL, provided
inappropriate advice to some customers'.
The CBA was challenged to defend its characterisation of the misconduct
at CFPL as 'inappropriate advice' during its appearance before the committee.
The CBA's group general counsel, Mr David Cohen, responded as follows:
'Inappropriate' is the word we used because it covers the
fact that in some cases advice was just not suitable for the client in
question. 'Inappropriate' covers the fact that some of the behaviours, which I
think you are alluding to, from some of our people just were not the
appropriate behaviours, were not the behaviours that we expect and enforce today.
As I said, the people, the structures and the culture just were not the right
people, structures and cultures at the time, and we should have done better.
The CBA was further pressed on this issue, and asked why it had used the
term 'inappropriate advice' in its submission when the chairman of the CBA,
Mr David Turner, told shareholders at the CBA's 2013 annual general
meeting that what had happened was 'shocking'. Mr Turner was further quoted as
There's no excuse for giving bad advice, absolutely no
excuse. We had the wrong people giving the advice and the business was
structured wrongly, and remunerated wrongly, and the culture was wrong.
At the committee's public hearing, the CBA conceded that 'some of the
workings of [CFPL] were shocking'.
It added that its use of the term 'inappropriate advice' did not mean that the
...the circumstances that occurred should be treated lightly,
and we certainly do not treat it lightly. We had taken the view—a very serious
view—that we needed to substantially improve the business because it was not
run the way it should have been run. There is no doubt about that. I do not
wish to downplay for a second the fact that the impact on customers was
severe...We do not treat lightly the fact that we did have poor systems, we did
not have the right people and we did not have the right culture, as the
chairman has said.
Pain and suffering resulting from the CFPL case
As noted above, despite characterising the misconduct at CFPL as
'inappropriate advice', the CBA acknowledged that the 'impact on [CFPL clients]
was severe'. The evidence provided by a number of former CFPL clients drove
home the extent of the harm caused, which went far beyond financial detriment.
These clients spoke of being bullied by CFPL/the CBA, and described the stress
and uncertainty that they and their families were subject to as a result of misconduct
The personal toll that this misconduct had on clients was made clear in
a submission from Mr and Mrs Mervyn and Robyn Blanch. Mrs Blanch was a
client of Mr Nguyen, and between May 2007 and March 2009, Mrs Blanch's
$260,000 investment in an Allocation Pension portfolio prepared by Mr Nguyen
was reduced to $92,000.
In addition to outlining the financial losses they suffered, Mr and Mrs Blanch
emphasised the distress they experienced in dealing with Mr Nguyen and other
CFPL and CBA staff:
Throughout our association with CBA/CFPL's staff and Nguyen
we have been subjected to deliberate acts of fraud and deceptive and misleading
conduct. We have been ignored, lied to, stonewalled, fobbed off, bullied, and
sent fraudulent documentation by CFPL staff and CBA's senior management within
Customer Relations. They actively tried to cover up Nguyen's activities,
denying any knowledge of or liability for his conduct.
In her appearance before the committee, Mrs Braund relayed how the
investment she and her husband made with CFPL coincided with the onset of
Mr Braund's dementia. Mrs Braund told the committee that her husband had
always taken care of their finances; as Mr Braund's dementia worsened, she
relied on Mr Nguyen to act with honesty and integrity. However, Mr Nguyen
failed to carry out her request that their investments be moved to cash in
early 2007 and used a copy of Mrs Braund's signature to move the Braunds' money
into high risk investments without her approval. Ultimately, this betrayal of
trust meant that at the same time as Mrs Braund was caring for her dying
husband, she was also forced to deal with a massive decline in the value of her
investment and a bank that refused to acknowledge any wrongdoing or provide
People's lives have been shattered. I have been scorned...
CBA has bullied me and they gave me this incredible feeling
that, while I was dealing with Alan's dying, I still had to try to deal
Mr Frazer McLennan, writing on behalf of his wife Gloria, who was a
client of CFPL adviser Mr Chris Baker, described the effect on his
wife of watching as her investment (which was placed in an aggressive portfolio
without her knowledge) rapidly declined in value:
[M]uch of Gloria's anguish is caused by her deep down to the
bone sense of fairness. She endeavours to make everything fair for all in any
situation, and sometimes to her detriment. In this case her sense of fairness
is being challenged, and it's not fair what Commonwealth Financial Planning is
doing, and it does her head in, which does 'us' harm as well. They are being
corporate bullies trying to wear down individuals who they have done wrong.
The committee notes that in a limited way the CBA has acknowledged that
there were problems in its financial advice business, and expressed regret that
some of its customers were affected by 'inappropriate advice' received from a
of CFPL advisers. The CBA has also acknowledged that it mishandled the Nguyen
matter, at least with respect to the CFPL investigation of his compliance
failures in 2008 and his subsequent return to CFPL in October 2008 after a
short period of suspension.
These modest acknowledgements aside, the committee believes that the
CBA's characterisation of the misconduct at CFPL as 'inappropriate advice'
provided by 'a small number' of CFPL advisers, deliberately and grossly
understates the extent of the wrongdoing within CFPL. The committee believes
the phrase 'inappropriate advice' comprehensively fails to capture the
deceptive and misleading conduct of CFPL financial advisers. Indeed, the
committee heard compelling evidence that client signatures were forged and/or
misused by CFPL financial advisers, and while the committee reserves judgement
on whether this activity would provide a basis for criminal action, it suggests
that to characterise such activity as 'inappropriate' is,
in itself, entirely inappropriate. Further, the phrase 'inappropriate advice' does
not capture the systemic failures in the CFPL's business operations, including the
ineffective compliance regime and toxic sales-based culture fostered by flawed
The committee also notes that the phrase 'inappropriate advice' stands
in stark contrast to the admission by the chairman of the CBA,
Mr David Turner, that what happened at CFPL was 'shocking', and that
there was 'absolutely no excuse' for the way the business was operated (see Box
Box 8.1: 'Inappropriate
advice' or 'shocking' conduct?
'CFP acknowledges that in the past a small number of
its Advisers, none of whom remain with CFP, provided inappropriate advice to
Source: Commonwealth Bank of Australia Group, Submission
261, p. 4.
The submission was provided to the committee on 11 November 2013.
'What we did was shocking. There's no excuse for giving
bad advice, absolutely no excuse. We had the wrong people giving the wrong
advice and the business was
structured wrongly, and remunerated wrongly, and the culture was wrong'.
Source: Mr David Turner, chairman of the CBA,
speaking at the CBA's 2013 AGM on 8 November 2013, as quoted in Clancy
Yeates, 'Rogue planner behaviour "shocking": CBA', Sydney
Morning Herald, 8 November 2013, www.smh.com.au.
Moreover, the committee remains unconvinced by the CBA's explanation of
the circumstances surrounding Mr Nguyen's promotion in October 2008 to the
position of senior planner. While the CBA acknowledged the decision to promote
Mr Nguyen was wrong, it explained that the reasoning at the time was that
in his new role Mr Nguyen would be subject to higher levels of supervision. The
CBA's explanation for Mr Nguyen's promotion is nonsense. Beyond the fact that
Mr Nguyen's poor practices were already well established by 2008 (indeed,
he had been rated a 'critical risk' by the CBA in 2006), there is little
evidence that upon his return to CFPL in October 2008 Mr Nguyen was placed
under heightened supervision for a prolonged period. The committee believes
Mr Morris's explanation for Mr Nguyen's promotion is far more
convincing: that is, CFPL management decided
it would be easier to 'hose down' client complaints, and generally minimise the
CBA's exposure to compensation claims, if Mr Nguyen remained a CFPL
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