The compensation process being undertaken by Commonwealth Financial Planning Limited (CFPL) concerning clients who lost money as a result of advice received from former authorised representative Don Nguyen has been delayed due to the bank’s reluctance to negotiate claims with Financial Resolutions Australia (FRA).
A number of Nguyen’s former clients have chosen FRA to act on their behalf to negotiate a compensation settlement due to losses incurred from poor advice, however, CFPL has nominated several reasons why it will not deal with the financial resolutions firm on the same terms as it had with representatives of some of Nguyen’s other victims.
A letter obtained by InvestorDaily indicated CFPL was refusing to pay former clients of Nguyen using FRA the $5000 as stipulated in the settlement scheme to cover the cost of seeking independent advice on the matter.
The reason CFPL has given for holding back the $5000 payment is that FRA is not a law firm, accounting practice nor a licensed financial planning organisation.
“Commonwealth Financial Planning is committed to resolving a remaining small number of matters for clients affected by advice provided by former adviser Don Nguyen. It encourages those clients to obtain advice at CFPL’s cost, up to $5000, as to the suitability of the resolution proposed,” a CFPL spokesperson told InvestorDaily.
“The choice of that adviser is totally within the control of the client. CFPL’s only stipulation is that the adviser be qualified as an accountant, lawyer or hold an AFSL.
“Despite having been given the opportunity to explain its qualification to do so, FRA has not satisfied CFPL of its qualification to give professional advice.
“CFPL has referred these matters to ASIC’s attention.”
On top of not covering $5000 of the clients’ costs incurred as a result of seeking advice in the matter, CFPL is also refusing to pay the 10 per cent to 15 per cent success fee FRA would otherwise be entitled to redeem at the conclusion of a successful settlement outcome.
The financial planning arm of the Commonwealth Bank of Australia (CBA) gave several reasons for its decision in this area.
Firstly, CFPL alleged the success fee relating to the Nguyen settlement scheme had been announced before FRA decided to represent some of the former authorised representative’s clients.
CFPL alleged that action timeline deemed FRA’s involvement in the matter “unjust and unconscionable under the Australian Consumer Law (schedule 2 of the Competition and Consumer Act 2010 (Cth), the Contracts Review Act 1980 (NSW), the Australian Securities and Investments Commission Act 2001 (Cth) and the general law”.
Secondly, CFPL argued FRA required an Australian financial services licence to provide the services it was to Nguyen’s former clients. It alleged that without satisfying that obligation, any consulting agreement was considered unenforceable, in turn meaning FRA would not be entitled to claim the 10 per cent to 15 per cent success fee.
In the correspondence, CFPL also declined to deal with FRA in an ongoing manner due to its concerns over the use of what the bank considered confidential information associated with the settlement scheme called Operation Hartnett.
The bank alleged the possession of that information had allowed FRA to “make unsolicited contact with our customers (and former customers)”.
Furthermore, CFPL alleged the use of that information might constitute a breach of privacy.
However, a FRA spokesperson revealed to InvestorDaily all the information gathered in regard to Operation Hartnett was obtained through Nguyen’s former clients with their consent.
CBA in its letter made an additional demand for FRA to identify the parties who provided the information categorised as confidential and to have any copies of that information returned to CFPL.
A response to how FRA was disclosing the information along with a complete list of CFPL customers FRA was in the process of representing was requested as well.
