CBA Scandal and FOFA Reforms

4755 Words Mar 18th, 2014 20 Pages
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
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Notably, PS 7.5 places great significance on the on financial planner’s duty of loyalty towards their client and the “not to profit without informed consent rule”. (Australia, 2013) (Government, 2011) Mr Nguyen and Mr Gillespie consistently generated excess individual profits through the intentional disregard of their client’s involvement. PS 7.6 deals with the suitability of services rendered towards the client’s specific wants and needs. The high degree of commonalty exhibited in the risk profiling of their clients expresses the lack of professionalism shown by Mr Nguyen and Mr Gillespie, as well as an evident conflict of interest. The actions of Mr Nguyen and Mr Gillespie are also in direct violation of the rules relating to PS 7. Both parties actively engaged in fraudulent behaviour, consistently deceiving and misleading their clients, in order to gain financially (Adele Ferguson, 2013).
B) Analyse the conflicts of interest that have been illustrated by the CBA financial planning scandal and the obligations of financial planners and CBA management in relation to conflicts of interest
The most evident conflict of interest evident by the CBA financial planning scandal is in relation to the member’s remuneration for professional services rendered. The very engagement between the client and professional equates to a conflict of interest with the client attempting to utilise the professional’s services
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