CBA admits breaching the law in response to royal commission findings

The Commonwealth Bank of Australia has admitted its planning arms breached the Corporations Act when they charged clients - including some who had died - fees for services they did not receive while other banks have fought bank against the accusations levelled at during the royal commission.

The CBA said it accepted that it had breached its requirement to act efficiently, honestly and fairly in respect to some clients. It noted it had already paid remediation of $118.5 million to its affected clients. It has also been subject to an enforecable undertaking from the corporate regulator as a result of its fees for no service issues.

CBA refuted other open findings made against it by senior counsel assisting the banking royal commission including that it knew its advice businesses did not have adequate resources to provide ongoing services.

"There is no evidence that CBA’s licensees did not have adequate resources available to provide ongoing services to its clients," it said.

CBA also pushed back on a preliminary finding by Ms Orr its planning arms Count and Commonwealth Financial Planning had not reported "significant" misconduct and other breaches to ASIC within the required 10-day time period.

In handing down her open findings two weeks ago, Ms Orr suggested that CBA's size meant that the test for the bank of what was a "significant breach" was much tougher than at a smaller bank.

CBA said in its statement that it accepts that it is open to find that the number of advisers and clients within CBA’s licensees was a factor in the length of time it took those licensees to become aware that a significant breach had occurred.

Rowena Orr has suggested numerous cases of misconduct by the banks.
Photo: Eddie Jim

"However CBA submits that this is contemplated and permitted by the legislative regime for breach reporting," it said.

Westpac refuted all open findings made against it at the royal commission, including that a failure of its systems to monitor its planners was responsible for misconduct.

It also refuted suggestions by the royal commission that its conduct fell below community standards when it did not report the misconduct of its planner Andrew Smith to the Australian Securities and Investments Commission (ASIC)

"The notice did not require identification of Mr Smith as an “Other Compliance Concern”, because that part of the notice was expressly restricted to financial advisers authorised by Westpac as at the date of the notice (6 July 2015) and Mr Smith had resigned in March 2015," Westpac said in its submission.

Westpac accepts that Mr Mahadevan’s conduct in giving the advice he gave to Mr and Mrs McDowall was 'misconduct'
Westpac submission

Westpac also denied that if conduct fell below community standards when it did not disclose Mr Smith's issues to his new employer Dover Financial.

Westpac's submission did admit that its adviser Krish Mahadevan engaged in misconduct when he advised a couple to sell their family home and set up a self-managed super fund. It accepted he may have breached parts of the Corporations Act.

"Given the circumstances outlined above, and for the reasons outlined below, Westpac accepts that Mr Mahadevan’s conduct in giving the advice he gave to Mr and Mrs McDowall was “misconduct” within the broad meaning given to that term in this commission’s letters patent," it said.

"While the advice was plainly inadequate, there is no basis to conclude that it involved either deliberate misconduct or dishonest conduct on Mr Mahadevan’s part."

ANZ Bank's RI Advice and M3 Financial planning arms also refuted all preliminary findings of misconduct against it as a result of its rogue planners and its charging clients fees for services they did not receive.

Ms Orr had recommended the commission find both former ANZ subsidiaries had breached the Corporations Act by failing to provide financial services efficiently, honestly and fairly, that it failed to take reasonable steps to ensure that its representatives complied with the financial services laws. Ms Orr also found RI Advice and M3 did not adequate resources to carry out supervision of its planners and risk management.

"No such findings are open on the evidence before the commission," ANZ said in its submission.

M3 and RI Advice questioned the procedural fairness of making findings against its planners -- even a planner known only as "Mr A" who the commission heard misappropriated client funds -- without giving those planners the change to tender evidence.

M3 has refuted all of the suggested findings made against it at the royal commission.

- With Clancy Yeates