The Senate Economic References Committee Scrutiny of Financial Advice Inquiry at its hearing on 21 April (see transcript here) into misconduct by financial advisers focussed on how financial services providers responded to misconduct by their financial adviser representatives.

For any financial services breach, how the financial services licensee responds can be as critical as the original breach.

Did the licensee notify ASIC? Failure to notify a significant breach within 10 days of becoming aware of it is an offence.

Did it investigate and remedy the breach? This is an essential part of a compliance system.

Did it apologise to the customer?

Did it compensate the customer?

In the case of misconduct is the adviser still employed by the licensee?

Is the adviser still working in the industry?

The Senate Committee asked a series of questions to CEO’s and senior managers from Macquarie Bank, ANZ, NAB and CBA about how they each responded to breaches and their customer compensation approaches.

Having an effective and fair complaints handling process is a key condition of every financial services licence.

In some cases however clients were not aware of fraud or inappropriate advice by their adviser and were not aware of their rights.

A cover-up or the provision of false information to a regulator can constitute separate offences.

The methodology of CBA’s compensation scheme has been examined in a report separately published by ASIC.