The Australian financial regulator continued its assault on the under-fire banking sector last week after extracting ‘enforceable undertakings’ (EU) from two big brand banks.
Under the EUs published last Friday both ANZ and the Commonwealth Bank of Australia (CBA) have promised to stop branch staff from selling in-house superannuation funds off the back of cursory ‘fact-finding’ missions.
According to the Australian Securities and Investments Commission (ASIC) release, both ANZ and CBA branch staff had been recommending house brand super funds after taking clients through bank-built fact-finding processes – dubbed ‘A-Z Review’ and ‘Financial Health Check’, respectively.
“ASIC was concerned that customers may have thought, due to the proximity of the fact-finding process to the offer of Essential Super or Smart Choice Super, that the CBA branch staff or the ANZ branch staff were considering risks specific to the customer when this was not the case,” the ASIC statement says.
“These court enforceable undertakings prevent CBA from distributing Essential Super in conjunction with a Financial Health Check and ANZ from distributing Smart Choice Super in conjunction with an A-Z Review.”
Both banks would also make a $1.25 million “community benefit payment” under the EU and hire independent experts to review internal compliance processes.
In a statement, ASIC deputy chair, Peter Kell, said: “ASIC will continue to proactively monitor how complex financial products such as superannuation are sold.”
The latest breaches – while relatively minor compared to revelations that have emerged out of the ongoing Australian Royal Commission (RC) into financial services – were discovered under ASIC’s ‘Wealth Management Project’.
Established in 2014, the ASIC Wealth Management Project targeted a range of financial sales and advice practices in Australia’s largest institutions, namely: ANZ, CBA, National Australia Bank (NAB), Westpac, AMP and Macquarie.
ASIC’s surveillance program has already exacted a number of multi-million fines from across the institutions while also supplying evidence to the RC.
NZ regulators are currently scoping out the local banking industry to ensure issues identified in the RC have not crossed the Tasman. Last week a NZ union – First Union – also criticised banks here for pressuring frontline staff into selling inappropriate products to customers.
The latest action capped off a busy couple of weeks for ASIC that included EUs from: NAB for wholesale spot foreign exchange pricing problems; Goldman Sachs for issues around its book-building process; and, Dover Financial Advisers –withdrawing the licence to operate for the large non-institutional financial planning group.
Dover chief, Terry McMaster, famously collapsed while being questioned at the RC in April.
Following the EU, the 400-plus advisers housed under the Dover Australian Financial Services Licence have been forced to find new homes.
Last week ASIC also named four financial advice firms in breach of laws restricting the use of terms such as ‘independent’, ‘independently-owned’ or ‘non-aligned’.
“Under the Corporations Act, a person who carries on a financial services business or provides a financial service is prohibited from using the terms ‘independent’, ‘impartial’ or ‘unbiased’, or any other term ‘of like import’ in relation to the business or service except where the person meets certain conditions, such as not receiving any commissions, volume-based payments or other gifts or benefits,” the Australian regulator says.