In a statement accompanying the submission, ASIC deputy chairman Peter Kell said the corporate regulator “stands by” the outcomes achieved against CFPL – although he acknowledged some of his organisation's process could have been “quicker and more transparent”.
ASIC has been under intense scrutiny since June, when Fairfax Media uncovered a culture of cover-up at CFPL along with an apparent failure by the regulator to respond quickly to complaints made by anonymous whistleblowers in October 2008.
In the regulator's defence, the submission points to actions that were taken in “early 2008” after ASIC identified “widespread problems” at CFPL.
Following surveillance conducted between February 2007 and February 2008, the regulator decided “the quality of advice and the standards of practice in CFPL were unacceptable”, said the submission.
“On 1 April 2008, CFPL implemented a Continuous Improvement Compliance Program (CICP) in response to, and to address, ASIC’s concerns,” according to the submission.
CFPL periodically reported breaches to ASIC throughout 2008 and 2009 as part of the compliance program – but the program's existence was not made public.
On 30 October 2008 ASIC received anonymous whistleblower complaints via email about the conduct of CFPL adviser Don Nguyen, as well as “a poor, sales-oriented, culture within CFPL more generally”.
“It was thought better to deal with the complaint as a particular example of the broader problems that ASIC had identified within CFPL and which the CICP program was designed to address,” said the submission.
The decision to incorporate the whistleblowers' complaint into the CICP program was made after CFPL acknowledged it had received complaints about Mr Nguyen.
“With the benefit of hindsight, ASIC considers that it should not have placed as much reliance on CFPL’s ability to identify and rectify all of the problems in its advice business,” said the submission.
ASIC also acknowledged in its submission that the CICP program should have been announced publicly on 1 April 2008.
“The public would have been informed, staff within CFPL (including the eventual whistleblowers) would have been aware of ASIC’s engagement with the business, and other participants in the industry would have better understood ASIC’s expectations and its approach,” said the submission.
The regulator also conceded that its communication with the whistleblowers, up until January 2010 when it sought a meeting with them, was “not adequate”.
The ASIC submission also admitted that one breach report by CFPL was lost after a hard copy was submitted at the regulator's office.
As a result of the action taken by the regulator, four CFPL advisers were banned (two permanently) and three other advisers removed themselves from the industry as part of an enforceable undertaking.
In addition, $50 million in compensation has been paid by CFPL to more than 1,100 investors – $23 million of which has been paid to former clients of Mr Nguyen. CFPL is also taking part in an enforceable undertaking that is due to end in October 2013.
