CBA admits failings in Nguyen investigations

11-Apr-2014

By Kate Kachor

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Commonwealth Bank of Australia (CBA) has told a Senate inquiry it made the wrong decision in failing to alert the corporate regulator sooner of misconduct claims made against one of its former financial advisers five years ago.

CBA general counsel David Cohen told a Senate committee conducting an inquiry into the performance of the corporate regulator that in hindsight, the bank should have contacted ASIC regarding the activities of former Commonwealth Financial Planning (Commonwealth FP) adviser Don Nguyen within 10 days of concerns being raised and not continued internal investigations, as it did.

The bank conducted a number of separate internal investigations, including one involving ex-police officers employed by CBA, into Nguyen’s activities, after allegations of fraud were raised by client complaints and made public in 2009 in an InvestorDaily story, written by Darin Tyson-Chan, now the editor of selfmanagedsuper.

“It’s fair to say ... that the decision made following that very first investigation [of] Nguyen in September 2008, the decision made around that, today we consider were the wrong decisions,” Cohen told the inquiry in Canberra yesterday.

“Today, when we look at that, the investigation that should have been carried out would have been much more thorough. We believe it would have, using today’s standards, that the business now applies, we believe that investigation would have uncovered far more facts and that would have led to a different action.”

The bank first suspended Nguyen from his duties as a financial adviser in September 2008. However, due to the inconclusive nature of the bank’s investigations, he was reinstated as a financial adviser and even promoted within the ranks of the bank’s advice division.

“The investigation that was carried out in September/October 2008 was inconclusive in its findings. I would like to add, right up front to that, that we don’t think the decision made around what to do following the inconclusive findings was the right decision,” he said.

“But that decision was made by management at the time and he was allowed to return to work after a period of suspension, when the initial investigation proved inconclusive.”

In response to who within CBA would have been aware of the decision to promote Nguyen, CBA group wealth executive Annabel Spring said, without naming names, she would have thought it was the head of Commonwealth FP.

In response to where that individual now was, Spring said: “He’s left the business.”

Cohen, and CBA wealth management advice executive general manager Marianne Perkovic said in unison: “He left in 2009.”

Tim Gunning was Commonwealth FP general manager in 2009. Gunning resigned from his post within the CBA-owned licensee in early September 2009.

Asked whether CBA reviewed the decision behind Nguyen’s promotion to senior planner, Cohen said the bank had.

“In hindsight ... it’s very clear to us that he should not have been promoted,” Spring added.

“The reason at the time seems to be that in this more senior position he would actually see fewer clients, he would supervise, but he would physically see fewer clients and he was also relocated to Chatswood [in Sydney] 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, at the time, the full extent of the misconduct was clearly not known, but with the benefit of hindsight it was the wrong decision.”

Asked how many advisers Commonwealth FP had during 2008 and 2009, Cohen told the committee the number was around 700.

In reply to a question about whether CBA was concerned it might have had “more than seven or eight bad eggs”, Perkovic told the committee that once CBA was aware of concerns, advisers were reviewed and a list of questionable advisers was created.

“Once issues were known, and we did have a list of advisers, the business actually did go back and review all of the advisers and that came up with a number of advisers that we did have concerns about,” she said.

“We then used an independent accounting firm to help us determine any patterns, and they used some forensic techniques, and so this led to the total number of advisers we did have concerns [about] was 19, including Nguyen and Mr [Anthony] Awkar.”

Asked whether a number of advisers were still under review, she said: “Some we are still reviewing, correct.”

In an earlier statement to the committee, Cohen said: “We deeply regret the situation that arose and as a result it has significantly transformed the way we run our financial advice business.”

Spring joined the wealth management division of CBA as group executive in October 2011.

Perkovic joined the bank in January 2010 as distribution general manager with Colonial First State. She was promoted to her current position in May 2011.

Commonwealth FP entered into an enforceable undertaking with ASIC on 25 October 2011 following the banning of Nguyen.

ASIC banned Nguyen in March 2011 after an investigation revealed he failed to comply with financial services laws.

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