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Economics References Committee - 21/04/2015 - Scrutiny of financial advice

COULSTON, Ms Veronica, Private capacity

HALPERN, Ms Naomi, Private capacity

MORRIS, Mr Jeff, Private capacity

SWAN, Ms Marilyn, Private capacity

WILKIE, Ms Danielle, Private capacity

Committee met at 12:20

CHAIR ( Senator Dastyari ): I declare open this hearing of the Senate Economics References Committee inquiry into the scrutiny of financial advice. The Senate referred this inquiry to the committee on 25 June 2014 for report by 1 July 2015. On 2 March this year, the Senate granted an extension to the committee to report by 1 February 2016. The committee has received 124 submissions so far, which are available on the committee's website. The closing date for submissions was 5 December 2014.

These are public proceedings, although the committee may determine or agree to a request to have evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee.

If a witness objects to answering a question, the witness should state the grounds upon which the objection is taken, and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If the committee determines to insist on an answer, a witness may request that the answer be given in camera. Such a request may also be made at any other time.

I now welcome Ms Naomi Halpern, Ms Marilyn Swan, Mr Jeff Morris, Ms Veronica Coulston and Ms Danielle Wilkie. Do you have anything to say about the capacity in which you appear today?

Ms Halpern : I am here as spokesperson for the Holt, Norman, Ashman, Baker Action Group.

Ms Swan : I am representing my parents, who were victims of CBA financial planning.

Mr Morris : I am here as the CBA whistleblower and representing victims of CBA.

Ms Coulston : I am here as an NAB victim.

Ms Wilkie : I am here as an NAB victim.

CHAIR: We are going to ask if there are any opening statements or remarks you want to make. In doing so, I want to say on a personal level, if not for the committee—the committee can speak for itself—that I think it is important to note the difficulty and the bravery in all of you for coming forward with your stories. We could not possibly do the work that we do if it were not for brave people like you—I know that each of you have a story—and the brave work that people like you do to allow us to really know what has gone on. Mr Morris, you are a friend of this committee. Do you want to begin?

Mr Morris : Yes, thank you. Senators, you have got it right in the title of this inquiry: scrutiny of financial advice. That is what is needed: scrutiny—scrutiny to expose the long-term lack of scrutiny by the regulator, ASIC, and scrutiny to expose the harrowing effects of that lack of scrutiny, mostly on the victims, whose lives have been completely overshadowed and in many cases absolutely ruined for many years and even decades. The Senate inquiry into ASIC last year found it was a weak and 'hesitant' regulator. We all know what happened at school when there was a weak and hesitant teacher in the classroom: the naughty boys played up. That is exactly what has happened here with the naughty boys who are appearing before you this afternoon. Let them run untrammelled long enough, and naughty boys turn into bullyboys.

The Don Nguyen saga showed clearly that CBA treated both the regulator and the victims with contempt. They reinstated and promoted Don Nguyen after they caught him committing outright fraud and set him back to work to cover it up by duping the victims and sanitising his files. CBA tried to pass this off as an isolated instance of a rogue planner and 'managers who are no longer with the company', but it was not an isolated instance.

We do not know how many times CBA have covered up for so-called rogue planners, but we do know they did exactly the same thing back in 2003 in the case of Rollo Sherriff. There, the Financial Planning Association suspended him, and CBA out-lawyered the FPA to get him reinstated. One of the victims, Kevin Day, took on the CBA, and they spent five years pulverising him in court before he had to accept inadequate compensation in 2008. Even the CBA now agree it was inadequate, but when did their further offer of compensation come through? Last Friday afternoon. Kevin Day has been living this nightmare since 1999. He is a broken man, shattered by this experience. He cannot be here today, because he lies seriously ill in hospital, his one hope being—like another CBA victim, Noel Stevens—to get some money back for his daughter before he dies.

Rollo Sherriff blew up again in 2010, and again the CBA covered it up and grudgingly paid out inadequate compensation to some—some—of the victims who complained, all under the benevolent eye of ASIC, the institutions' friend, certainly not the consumers' champion. The current management team at CBA then did a Pontius Pilate and jettisoned the group Rollo Sherriff worked for, in 2012, in questionable circumstances.

Many of you senators here today also sat on the previous inquiry into ASIC and CBA and are well aware of the extent of the malfeasance exposed in the 547-page report compiled by Senator Bishop: fraud; forgery; management cover-ups; victims bullied, belittled and stonewalled for literally years; and the fact that CBA's evidence to the inquiry could not be believed on many points. The staggering conclusion was reached that neither CBA nor ASIC could be trusted to carry out or oversee the further compensation of victims required. Finally, there was a carefully and soberly weighed recommendation for an unprecedented royal commission into the CBA.

Senators, the umpire had given his decision. Then what happened? The CEO of CBA made a grudging apology of sorts, riven with PR spin, minimising what had occurred. To claim that CBA never sought to low-ball victims was simply laughable in the light of the experience of Jan Braund, Robyn Blanch and many other victims over many years of fighting for justice. The chairman of CBA also sought to minimise what occurred by claiming that the matter moved up the chain too slowly, yet I had delivered all the necessary information to the top floor of CBA in June 2009, and the cover-up continued.

CBA were let off the royal commission that would have exposed the full rottenness of what had occurred without even a fine. Their punishment consists of just having to pay back some of the compensation they owe to some of the victims in a scheme fully under the control of the CBA, precisely contrary to the recommendation of the Senate inquiry and indeed common sense. This is like letting the criminal decide his own punishment and restitution.

The man in charge of the Open Advice Review Program, Dr Brendan French, was, as head of Customer Experience, arguably the man most responsible for the shameful treatment of victims over many years. Not surprisingly, this continues under the rather opaque OARP. It seems a scheme designed to grind victims down with further interminable delays then force them to run the gauntlet of the CBA Customer Experience professionals before they gain access to a panel of independent consumer advocates dictated to them by the CBA. Incredibly, victims are not free to select their own choice of independent advocate.

None of the victims I have spoken to have received anything meaningful from CBA in the nine months this cruel hoax has been running. This is merely adding to their misery and anxiety. Senators, this is not justice for the victims; it is a travesty of justice.

It would seem that CBA were let off a royal commission on the basis of this latest sham compensation scheme. Since then, what you might call 'the troubles' at Macquarie, NAB and ANZ have emerged, which point clearly to a systemic problem across the industry, a systemic problem that is wrecking thousands more lives every year. The government has failed to face up to the need for a royal commission, yet I know there are many members of the government, some of them here today, who do not support this position.

I therefore call upon the government to defer the question of whether to call a royal commission into financial services to a conscience vote of the parliament. I ask this on behalf of a man in hospital in Queensland who still hopes for justice after 16 years. Thank you, senators.

CHAIR: Thank you, Mr Morris. Ms Swan, do you want to make a few remarks?

Ms Swan : Yes, thank you, Senator Dastyari. I represent the victims of CBA, particularly my parents. On 21 October 2014, the Chairman of ASIC, Mr Medcraft, publicly stated that Australia is a 'paradise' for white-collar crime. For the victims of CBA, this appalling statement of fact was not a revelation. Mr Medcraft was not referring to criminal gangs; he was referring to an Australian financial industry motivated by greed. The 2014 Senate inquiry into ASIC exposed the negligence of ASIC as the corporate watchdog—I call them the corporate lap-dog—and the criminal activities of fraud, forgery and misleading and deceptive conduct which passes as the acceptable business model within the financial-planning sectors of CBA.

My father wrote an impact statement for this inquiry. He wrote:

At 88 years of age I may not live long enough to see anything positive come out of this Senate Inquiry. My only hope is that Don Nguyen is … prosecuted for what he has done to elderly retirees such as ourselves, and that everyone in CBA's management who covered up his activities are also prosecuted.

Senators, nothing has happened. My dad went on:

We have sacrificed our privacy to … expose CBA/CFPL's activities in an attempt to see some justice served.

…   …   …

… we have no trust that ASIC is either capable or willing to perform its role as a corporate regulator when dealing with powerful institutions such as the CBA.

He said, 'We fear for the financial security of our children and our grandchildren if nothing is done.' Senators, nothing has happened at ASIC.

We are here again in Canberra today, just one year after that Senate inquiry, because the white-collar criminals working in the financial sector have not been brought to justice. How long does my now 90-year-old father have to wait to see some justice occur? The white-collar criminals Medcraft refers to are the very same financial institutions appearing before you today. Over the past 12 months, the criminal activities of each and every one of these institutions have been exposed, not through ASIC's activities but through the repeated stories of hardworking Australians who have fallen victim to the illegal activities of these institutions, exposed by the integrity of the whistleblowers and the journalists diligent enough to follow up every lead.

I settled with CBA in 2010 as a cost-benefit response. My parents and I were ground into an emotional and physical submission by the stress of more than 12 months of CBA's denials, fraudulent documentation, cover-ups and blatant lying. Even on settlement, we were being told that my parents were the only complainants against Don Nguyen and CFPL—this was in June 2010—a statement as fraudulent as the financial advice they received from CBA three years earlier.

I have registered my mother for this CBA advice review program, a review program being carried out by the perpetrators of the offences conducted against her, the same institution a Senate inquiry found to be involved in unlawful activities against their clients, and the institution found to be morally and ethically bankrupt. The CBA Open Advice Review Program being promoted by Mr Narev is simply a public relations exercise with no conceivable perception of transparency, independence or integrity. The file review staff, the independent panel, the forensic expert and the independent client advocates have all been appointed by CBA and are all on CBA's payroll. This is akin to allowing the criminals to run the victim compensation process. Further to this, Dr Brendan French is overseeing this program. To every victim of CBA, this is a slap in the face. Interestingly, when I was registering my mother for this, a message came up twice. 'CommBank website not responding' appeared on the screen—not an unexpected response for a CBA victim.

On 22 October, I had a meeting with the CEO of CBA, Ian Narev. Despite Mr Narev's protestations to the contrary through media releases, and probably before this committee today, nothing has changed at CBA. How could it?

During our meeting, Mr Narev informed me that seeking financial advice and investing is a buyer-beware activity—a sobering comment from the current CEO of CBA. Clients attending financial institutions who pay professional fees for professional financial advice have a right to expect honest, reliable and informed financial advice and services. According to Mr Narev's own words, this is not a reasonable expectation. The buyer-beware statement clearly illustrates Mr Narev and CBA accept no responsibility for the quality or honesty of financial services provided by CBA. If CBA is providing a Mickey Mouse financial advice service, then fine, but they should be clearly advertising this fact in their bank branches.

Despite any statement here today, the reality is that bank clients cannot be confident in the professionalism of their banks. Even the best research undertaken by an investor is irrelevant when those who are trusted by the client to provide the professional financial advice do so with their own financial interests as their private incentive for their advice. Investors are not consulting psychics. We are not consulting palm readers or getting our financial advice from nefarious online websites. We are paying professional fees to financial institutions who have, across the board now, fallen well short of honest and reliable services. I am sure that Mr Narev would not accept a buyer-beware policy with respect to the healthcare of his family, the education of his children, the engineering of the plane he is using today or the pilot's skill. The financial institutions appearing before you today have large legal departments well aware of their legal responsibilities and licence requirements for doing business.

Senators, I have to ask you: it is 12 months since I was here; I am back again; why is clear evidence of fraud, forgery, deceptive and misleading conduct, and subterfuge towards clients repeatedly not being reported as breaches of compliance to ASIC and criminal matters are not being reported to law enforcement agents by these banks, except if the fraud is against the CBA by their own employees? Why is Mr Nguyen continuing to enjoy a large CBA-Comensura annual payout despite evidence of his illegal activities? One has to be suspicious.

The past two years of this saga have seen no more than a handful of perpetrators banned by ASIC and even fewer inside a court room despite clear evidence of unlawful activities. The incestuous relationship between the financial institutions, the Liberal government and ASIC does nothing to engender confidence in the financial system—a system blatantly still rife with white-collar crime. Nothing less than a royal commission into the financial institutions will return the confidence of Australians to the financial industry. We need subpoenaed evidence, we need those lost documents to turn up and we need evidence given under oath. Until this happens, working Australians will have nothing but contempt towards this unholy trinity.

The Australian government is now calling for my generation not to be a burden on those who follow us, but we need legislation from this government to ensure that when we invest our hard earned income we are investing it in companies that are operating with ethical, legal and regulatory guidelines. A buyer-beware policy within these Australian banking institutions is not good enough for anyone's financial security. So, Senators, I call on you today: this is our chance. No more buyer-beware, hocus-pocus attitudes and policies from banking CEOs like Mr Narev. No more use of semantics, half-truths and misleading and deceptive statements from banking CEOs. We have had enough. Senators, I appreciate the opportunity to appear before you, but I hope and trust we will not need to repeat this process annually.

When my parents accepted financial advice from a CBA planner, they did their due diligence. They did nothing wrong. The liars and the criminals were inside the system. Current exposes indicate this remains the case. My parents and all the other victims of these banks must not die waiting for justice and accountability. Too many have already gone down that path. I thank you for the efforts that you are making.

Ms Halpern : I have a document that I would like to table. Do not worry; I am not going to be wading through it! It is for you to take away. I have a very brief statement that I would like to make. Firstly, on behalf the victims, I would like to sincerely thank the committee for this inquiry and for the opportunity to speak about scrutiny of financial misconduct. I would also like to thank the senators and their advisers and other parliamentarians who have so very generously given their time over the past 12 months. I have previously given detailed testimony about the plight of victims at another hearing, so I am not going to repeat those stories here. I think the name Peter Holt and his activities are well known to the people on this committee.

We are all here for a common purpose. That is because we agree it is a shameful situation where regulators and the law fail citizens, allowing greed and corruption to flourish, devastating lives. Victims of financial misconduct and fraud fall through gaping holes in a system that provides enormous scope for offenders to legally protect themselves while leaving innocent victims hung out to dry, desperate and despairing.

Our action group was 100 per cent behind actions to protect the FoFA the legislation, and now it is our turn. Compensation for victims such as ourselves must be retrospective. Urgent action is required now to assist victims and to protect the community. The industry and regulators must work with government urgently and step up to the plate. There is a moral and ethical responsibility to provide financial redress to victims and to radically reform the system and laws. A complete overhaul of the industry is needed. It is clear that there is a systemic and deeply entrenched culture of betrayal of trust, conflict of interest, fraud and corruption, and a great deal of confidence of those involved in getting away with it because that is the experience they have had for a very, very long time. The Senate inquiries held over the past couple of years into various aspects of the financial services industry—lenders, products and regulators—I believe strongly highlight that a royal commission is imperative and urgent.

CHAIR: Thank you very much. I know there will be a fair few questions from a few senators. I might start. I have only one or two questions. I am very conscious of the time and I want to give every senator an opportunity to ask some questions. Mr Morris, you heard the evidence from Ms Swan about Dr Brendan French. How does that make you feel?

Mr Morris : I am disgusted that he is even still employed by CBA let alone that they would blatantly take the mickey by appointing him to be in charge of the supposedly all-singing, all-dancing new compensation program. The thing that prompted me to blow the whistle to ASIC back in October 2008 was not just the existence of the rogue planner Don Nguyen; it was the management conspiracy to cover it up. Right from the very start in that report to ASIC I said that the customer experience people were an integral part of that because they were the ones who were basically snowing the victims. The catalyst for my decision to blow the whistle in fact was when I found there was a CBA customer experience manager—and I do not need to name him here today—who was lying to some clients of mine and trying to deceive them. They were victims of Don Nguyen. Then I realised there was a systemic cover-up and the victims stood no chance against the bank. The key thing was that customer service manager who was part of it. In Marilyn's experience with CBA, she found blatantly forged documents representing her parents. Again, it was a CBA customer experience manager who forged those documents. CBA customer experience managers were the face of the cover-up to deceive the clients. The man in charge of customer experience for all those years and who is possibly more responsible than anybody else at CBA not only is still there but has been put in charge of this new compensation scheme.

CHAIR: Finally, what do you say to the people who say—and this is a criticism that has been made—that everything is now fine and rosy within the industry. There have been a few things that happened in the past. They have been dealt with. They have been properly addressed through FOFA, which I think was a fantastic piece of legislation, which took out some of the incentives. But, as result of that and efforts now to improve standards—again something that I support—they say there are no more problems and that everything is okay and everything is fine and rosy. We should all go on our merry way. You have heard those criticisms. What do you all say to that?

Mr Morris : I think anybody saying that is living in a fool's paradise. Certainly everything that is done is a step in the right direction, but the problems are far worse and more systemic than I think are recognised by the changes. I personally do not believe even the FOFA changes went far enough. I think there is more scope there. We have just seen in the media in the last week that ANZ has been systemically collecting income and not delivering the services in return for it. In a submission to the previous inquiry I spelt out that that is a problem across the whole industry. In fact the industry has been built on creaming off streams of unearned income and not giving services over many years. As I said, anybody who says that is living in a fool's paradise. But I will leave it, if anybody else wants to comment.

Senator XENOPHON: Ms Swan, in terms of the Financial Ombudsman Service, can you tell the committee briefly, given time constraints, what your experiences were in respect of that. We did speak privately before, and you indicated to me some of the issues you had. Can you just outline the issues in terms of any delays, in terms of getting an appropriate response. I just want to see whether the system is working as it should.

Ms Swan : I can certainly tell you that the system does not work. I dealt with CBA's customer experience managers, and, eventually in December 2009, I put a FOS submission in regarding the things that I had discovered—fraud, forgery, deceptive and misleading conduct et cetera. It was accepted as a valid case by FOS. That went in in December 2009. Despite repeated requests, CBA chose to completely ignore this FOS action. Coincidently, at the same time, between 2009 and mid-2010, Dr Brendan French was a director on the board of FOS New South Wales.

Senator WILLIAMS: Did FOS make the recommendation?

Ms Swan : No. FOS just continually gave CBA extensions of time. I wrote to them in April to say I wanted copies of any documentation CBA submitted, given that I had four copies of fraudulent documentation from CBA.

Senator XENOPHON: Sorry to interrupt. Given that there are a number of my colleagues who have questions to ask, I just want to get to the nub of the issue. Would you have any issue in the committee writing to FOS to try and get your file so that they can see the chronology? It seems to me that yours may be a case study as to how the system works or does not work.

Ms Swan : Yes.

Senator XENOPHON: You were telling me that it took a number of months before there was a response.

Ms Swan : There was no response. CBA never responded, and the only way it all came to a halt was when I dragged CBA kicking and screaming to the negotiation table—and they would only pay up if I wrote to FOS saying I was satisfied with the negotiations I had had with CBA.

Senator XENOPHON: Would you have any difficulty in providing authority for the committee to obtain your FOS file—

Ms Swan : No, I would have no problems.

Senator XENOPHON: and similarly we can ask the Commonwealth Bank. You do not have an issue for that to be obtained by the committee?

Ms Swan : No.

Senator XENOPHON: That is fine. My understanding is that the way the system works is that, if you have a claim for more than $150,000, you cannot claim?

Ms Swan : That is correct.

Senator XENOPHON: So if you had a claim for $160,000, you cannot claim. Is that right?

Ms Swan : Yes.

Senator XENOPHON: Even if you are happy to accept $150,000?

Ms Swan : That is correct. This is also an organisation funded by the banking institutions. Each and every time I get a letter from CBA it always tells me to take my problems to FOS.

Senator XENOPHON: Okay. If we can get your file, that might be quite instructive of some of the process issues that you have complained of that I think ought to be looked at. I think that is a matter for the secretariat, if we can raise it, Chair?

I would like to see how it has worked or not worked.

CHAIR: Yes. I think we will make that a matter for the committee.

Senator XENOPHON: I have one more quick question for Mr Morris. Mr Morris, you are saying that Mr Nguyen continues to be paid income protection; is that right?

Mr Morris : Yes. The CBA has confirmed that fact. There is no dispute.

Senator XENOPHON: But he was banned as an adviser. Is that right?

Mr Morris : Yes. He has been banned for seven years. He claimed income protection from CBA under an income protection policy. Insurance companies are basically very good at getting out of these claims, normally; and with any claim for a psychological disorder it is very hard to get money out of them, normally. His claim was for stress—and it was very stressful for him when he was exposed for what he was. But he should have been sacked by CBA in June—well, he should have been sacked many years earlier. He should have been sacked by CBA. The fact is that, in the end, they confronted him with his sins and they let him go away and write a letter of resignation.

Senator XENOPHON: Perhaps I will put these issues to Mr Narev. Having acted for clients on some of these income protection plans as a solicitor I can tell you that it is pretty hard to get claims up, so I would be interested to know how this particular claim was accepted.

Mr Morris : The thing is that Mr Nguyen could probably inform the committee of the managers he was dealing with at CBA. So the payment has always been, I think, absolutely outrageous and it continues to this day, I believe.

Senator XENOPHON: Thank you.

Ms Swan : I also raised this during my meeting with Mr Narev, and he told me it was an insurance matter and nothing to do with him.

Senator XENOPHON: Okay. I might just confirm that with Mr Narev. Thank you.

CHAIR: Senator Williams.

Senator WILLIAMS: Mr Morris, you said in your opening statement, outright, that Don Nguyen committed fraud. Is there evidence of that? You need to be quick.

Mr Morris : Yes. He was caught paying bribes to bank staff—cash bribes for referrals. He was caught—

Senator WILLIAMS: Do you have evidence of that or would CBA have evidence?

Mr Morris : CBA certainly have evidence. It was investigated by Group Security. He was also caught effectively embezzling money from Comminsure, the group insurance company, submitting fraudulent invoices for financial plans.

Senator WILLIAMS: So you have no doubt there would be evidence of criminal activities there?

Mr Morris : There is no doubt. ASIC even investigated it. But it did not feature in his banning order because I think ASIC investigated it after they did the banning order.

Senator WILLIAMS: Yes. It might be interesting, Chair, to speak to Mr Nguyen at some time in the future.

CHAIR: I think that is a suggestion the committee could consider.

Senator WILLIAMS: Did you work under Mr Tim Gunning?

Mr Morris : Yes. He was the general manager of CBA. It was on his—

Senator WILLIAMS: Of CBA's financial planning?

Mr Morris : CBA's financial planning arm. It was on his watch that Don Nguyen's corrupt conduct was covered up—by a corrupt management team headed by him.

Senator WILLIAMS: Perhaps we need to speak to Mr Gunning as well.

Mr Morris : But I believe it extended further up the line than him. There were other executives as well that he reported to.

Senator WILLIAMS: I read your submission to this inquiry, Mr Morris, and I want to go to one point that has probably gone under the radar. You said, 'After Rollo was finally terminated, the man left holding the baby at Meridien Wealth was Peter Percali.' Could you expand on what Mr Percali said to you?

Mr Morris : I have spoken to Peter Percali. It is probably too big a matter to go into here, but he was actually helping victims to claim compensation, for CBA, and he believed that he was effectively paid off to stop doing that.

Senator WILLIAMS: Right. The last point I want to raise with you is vertical integration. It is clearly a problem in the industry. If you are a financial planner, you work for a particular company. If I were selling cars and I worked for Toyota, and you came in wanting to buy a vehicle, I probably would not be concerned about what was in your best interests; I would want to sell you a Toyota. Correct?

Mr Morris : Correct. That is what a lot of the problems come back to. In fact, the big institutions make most of their money in the next step up the food chain, with the product, and the problem is the banks run financial planning as a sales channel to feed into that. That is the problem. They look at financial advice as being a sales channel and they do not seem to be conscious of the fiduciary obligations that go with it.

Senator WILLIAMS: If you were running the whole industry for one day, would you think it a good idea that, if you had a situation where a company had a licence for financial products, they could not hold a licence for financial advice?

Mr Morris : Yes. I believe that is probably a key step in reforming the industry.

Senator WILLIAMS: So that would be to just take the financial planners away from the institution they work for and have independent planners?

Mr Morris : Separation of product and advice—absolutely.

Senator WHISH-WILSON: Can I ask for a point of clarification. I received an email from a financial planner who, like you, Mr Morris, has had over 20 years in the industry. He said to do something similar—to make it illegal, for example, for super funds to make commission and fee payments directly to advisers. Would that be another way you could do it?

Mr Morris : That is probably a different issue. I do not know whether he is talking there about the advisers who are purely within super funds who have a very restricted mandate to advise, but I do not think those advisers are the problem. I think it is the armies of advisers that are employed by the big institutions that are the main problem in this country.

Senator BUSHBY: Thank you very much for coming along today and, as the Chair said, sharing your experiences with us. What is it that you are seeking at the end of this process? I understand that there has been cause for royal commissions and things—that is another process. If there were to be a royal commission, what is it that you would want them to find? Where do you want to end up out of this process? What are the outcomes that you think would fix the problems?

Mr Morris : Senator, with all due respect, this committee has very limited resources and hearing days. I think to uncover the full atrocity that has been perpetrated, to uncover all the heinous conduct so that people can understand exactly how bad the industry has been, will take a royal commission. The other problem is that a few of the planners have received banning orders, and some of them are just working as business development managers in the industry. It does not prevent them from working elsewhere in the industry. The managers at CBA who did this have all gone off and are working elsewhere in the industry, so nobody has been punished for what they did wrong. As long as that continues, these people are not going to change. I think we have to get a handle on just how bad things are in order for everybody to appreciate the need for fundamental change to the industry to fix it. Part of that, as Senator Williams pointed out, is vertical integration and part of it is things that have been put in place like increased training for planners and so forth. But we need to establish a starting point to move forward. The other thing is, when you talk about the end game and what you want to accomplish, CBA has now had this latest hoax of a compensation scheme running for nine months and I do not know a single victim who has seen any money out of it. We would also like to see the victims get compensated.

Senator BUSHBY: We will obviously have an opportunity to ask the banks about their compensation schemes later this afternoon. Out of that there are two aspects: one is the more specific addressing of the particular issues that you and the people you represent have faced over the last decade or so. But more broadly, you are saying that the reason why you would like a more in-depth examination is so that you can basically break the industry right down before it gets built back up again. Is that a fair summation?

Mr Morris : I think it is at the stage where everything does need to be almost broken down—levelled—so you can start again and build on a firm foundation.

Ms Swan : I would like to say as a representative of victims of this sort of white-collar crime that seeing white-collar crime persistently go unpunished is galling. If I had forged Mr Narev's signature on a cheque, I am sure he would quickly find the number for the police and I would be talking to you from a cell. It is not happening for us. It should be appalling that Australia is a paradise for white-collar crime. That is an appalling statement that we need to face up to. I would like to see some white-collar criminals in prison greens and answerable.

Senator BUSHBY: To clarify, are you saying that there are existing laws that are being broken—

Ms Swan : Yes.

Senator BUSHBY: and there is evidence to convict people that is not being acted upon?

Ms Swan : Yes.

Senator BUSHBY: Or are you saying that there are matters that are occurring which the laws are inadequate to address?

Ms Swan : No, there are forged signatures. My mother's signature has been forged on a document; I have fraudulent manufactured documents that were made to try and cover up and therefore undermine any claim I was making. Any settlement that is offered comes with no admission of liability and a confidentiality thing.

Senator BUSHBY: These have obviously been brought to the attention of the police and/or ASIC?

Ms Swan : With due respect, I cannot keep doing this, and if nothing positive comes out of today my next trip is to the police.

Senator BUSHBY: I think that should have been the first place if you have got proof of that type of activity.

Ms Swan : Yes. But it is not just me; it is across the board. I just think that this assumption that white-collar crime is okay and that it is part of doing business is totally inacceptable to hardworking Australians.

Senator BUSHBY: Personally, I do not know anybody who makes that assumption or accepts that. But we are not a prosecutorial body. The police, both state and federal, have powers to deal with this, and if there is proof of a breach of a law, whether it is white-collar or any other law, then that is where the attention should be brought to bear.

Ms Halpern : Can I just make a comment about that? The financial adviser that we, unfortunately, had dealings with was an independent financial adviser, not through a bank. Fraud is an incredibly difficult thing to prove.

Senator BUSHBY: It is, and I understand that.

Ms Halpern : A lot of the fraud that we were subjected to was verbal. It was his lies, his misrepresentation, his manipulating of things to look one way and then be the other way. So I do not know how you actually address that fact.

Senator BUSHBY: That comes to the question that I asked Ms Swan: are there breaches of the law that you are aware of, with evidence to convict, that are not being acted upon, or is the law insufficient to actually address the problem? I think in your case it is probably the latter.

Ms Halpern : I think the law is insufficient. There are people in our group who say that they have loan documents that were doctored and altered—things whited out, information put in that was incorrect. But just in terms of ASIC, we went to ASIC twice. It took I do not know how long for them to actually agree to meet with us. They eventually did. We went en masse and presented them a questionnaire with 40 of Holt's victims that showed a pattern of his behaviour of doing the same things, putting people in the same strategies regardless of their income and regardless of what their stated financial goals were. They then went ahead and banned him based on information that they had from other clients that had made complaints separate from us. But they were not interested in pursuing other evidence that we had that would suggest that there is some criminal investigation that needs to take place. Now, they have, since the heat previous inquiries, contacted us in March, saying they would like to meet with us again, and we will meet with them again. But, at the moment, we are very focused on trying to help our members with the Timbercorp situation. So ASIC has to sit on the back burner until we then turn our attention back to them.

Senator BUSHBY: Thank you.

Senator CANAVAN: Have you been to the police?

Ms Halpern : No.

Senator CANAVAN: Can I ask, across the panel, has anyone taken matters to the police?

Mr Morris : No, I do not believe so. But I think that the problem is that it is very hard to take matters to the police when CBA, or the institution, is actually trying to suppress it or oppose it or apologise for it. Really, they should have an obligation to take their employees' misconduct to the police, but it is not in their interest to have employees being convicted of fraud. And the police generally are not that interested in this sort of matter.

Senator KETTER: I have just a couple of questions. I just wanted to have this clear in my mind: is it your testimony that a royal commission is a necessary step before we can reform the industry to move to something that we can be more comfortable with?

Mr Morris : I think you can always improve things. There are always second-best solutions. I guess what I am saying is that that is the best solution. The way to cut to the heart of it is to put some resources into this. Aside from pink batts and so forth, I think when you look at some of the other royal commissions, such as the child abuse royal commission, and you look at the absolutely appalling conduct that has been uncovered there, I think it has brought it into the consciousness of every person in this country, and nothing compares to that. I think a royal commission would be very valuable in terms of just bringing into the public consciousness that this is what has been happening and that it is wrong. Then, like the child abuse, there will be a lot more determination to do something about it.

Senator KETTER: You have been very critical of the Commonwealth Bank's attempts to address the situation through its open advice review program.

Mr Morris : Yes.

Senator KETTER: On the surface of it, they have written to 300,000 customers and they say that there are 4½ thousand customers who have registered with the program. It sounds like progress has been made, but you are saying that there are no payments being made at this stage.

Mr Morris : Yes. Also, I have seen a letter they have written refusing to look at every client of a known crooked planner, Rollo Sherriff—refusing to look at all those clients. All of those clients have to register individually before they will look at them. So, even where there is a known problem, they will not even investigate everybody for compensation. They are not actively looking for problems that they know exist. Five thousand people I think is a joke. I mean, it is a lot of people; clearly it has demonstrated there is a problem. But I think the true number of people entitled to compensation is a lot higher. I think there are a lot more rogue planners—I know there are a lot more rogue planners that CBA have not owned up to. And I think a lot of advice that was not even given by what you would call a rogue planner is compensable at CBA, and it has not been caught in this program.

Senator WHISH-WILSON: Mr Morris, do you know if they are still at CBA?

Mr Morris : Who is that?

Senator WHISH-WILSON: Those rogue planners you were referring to—do you know if they are still at CBA?

Mr Morris : They probably are. I am not aware of them. But one of the outstanding features of this CBA scheme is: they are dictating to people who their independent representative will be. CBA tells you who your representative is going to be. Most people would not call that independent. But that is their view of the world, and that is part of the problem with these scheme. If you put somebody in place who has been a major part of the problem since 2008, and put him in charge to run it, then, frankly, you are just taking the micky.

CHAIR: I am very conscious of time and, Ms Coulston and Ms Wilkie, I want to just put a question to you and give you an opportunity—

Senator EDWARDS: Do I get a shot?

CHAIR: Sorry; I thought you were giving your time to Senator Bushby.

Senator EDWARDS: I am sorry; I had not communicated it.

CHAIR: Jump in.

Senator EDWARDS: We have had an inquiry into the Commonwealth Bank and ASIC here at the Senate before. Senator Fawcett was the chair of the parliamentary joint committee inquiring into financial advice. There were 14 recommendations from that. Would you say, Mr Morris, that they are fairly sound recommendations?

Mr Morris : Absolutely.

Senator EDWARDS: There were those two committees and now this one, the third inquiry. I think everybody, including the management of all the banking institutions and financial planners, are the rabbits in the headlights. They are in the public focus. There is no greater public focus in parliamentary terms than parliamentary joint committees and Senate inquiries. Everybody is at the forefront. We have had a number of recommendations now from all of these inquiries, and there will be more here. I think we have all got the message. As to the 14 recommendations that were in the PJC report, is there anything in there that you do not think is going to satisfy you going forward? I am referring to your continual calls for a royal commission.

Mr Morris : As I said, I think all progress is good. It is just that I think the magnitude of the problem is greater than what is being addressed by these measures. Increased financial planner education is good, but in itself it is not going to solve the problem. A lot of the problems go back to the point of the vertical integration between the product providers and the advisers, and the sales focus, and it comes down to things like remuneration. There was something in FoFA about commissions, but, effectively, the banks are still doing the same thing but just calling them bonuses.

Senator EDWARDS: I know, but we have had five inquiries. I have referred to the three: the one that we are in, and the two that we have had. They were meaningful inquiries.

Mr Morris : Absolutely.

Senator EDWARDS: And, in a way, it sort of diminishes the work of those previous inquiries, because they were quite bipartisan—everybody agreed, right across all party lines. Everybody had a lot to say. And they came up with some recommendations. But now we have legislation which largely goes to address a lot of these issues and we are looking to put these in place. And then Minister Shorten received a statutory compensation review about the Future of Financial Advice, on 5 April 2012, trying to address this. The recommendation to him was largely, again, the recommendations which have come out in the Senate inquiries. When do we stop having inquiries and actually get in to fix this so that there are no more victims of this kind of malpractice?

Mr Morris : You have answered your own question. When there are not thousands of victims of these practices every year. As I say, everything is good. The adviser register is good. But when you look at the detail of that it will take many years for that to become effective, because it only includes five years work history.

Senator EDWARDS: Why do we not get that legislation in place now while we can?

Mr Morris : Absolutely.

CHAIR: It is in.

Senator EDWARDS: No, we are looking to bring in other legislation, which is being blocked in the Senate.

Senator WILLIAMS: What about the crooks who are getting away with it?

Senator EDWARDS: I do not want any crooks to get away with anything.

But they are.

Senator WHISH-WILSON: Senator Williams made a valid point in speaking about fraud and criminal activity.

Senator EDWARDS: I am not looking at retrospectivity. I agree that there has been some major fraud, Senator Williams; you are quite right. But I want to fix this culture so that it does not happen again. So do you, but we need some impasses in the Senate unblocked to get this legislation through.

CHAIR: Senator Edwards, I am very conscious of the time. I know we could go on for—

Senator EDWARDS: I could go out and do a media conference, I suppose, and articulate my views out there.

CHAIR: You, as a senator, are more than welcome to do that. I apologise to Ms Coulston and Ms Wilkie because we have not had the opportunity really to talk to you today. Mr Morris, in summation, I want to be clear on what you said. Taking steps forward with things like FoFA about removing incentives and things like improving the standards of financial planners are a good thing, are they not?

Mr Morris : Absolutely.

CHAIR: Does that remove the responsibility of major institutions, including the banking institutions, for the people who have been the victims of financial misconduct, incompetence and crime?

Mr Morris : No, not at all. It is a partial solution, is the point. The tendency of institutions of course is always to push the blame down the line to the pawns and to blame rogue planners.

CHAIR: Can we and should we do better, especially in how we deal with the people and the real human stories in all of this?

Mr Morris : Absolutely.

CHAIR: Mr Morris, Ms Wilkie, Ms Coulston, Ms Swan and Ms Halpern, thank you so much for your bravery in coming forward with your stories. We could have spent four hours with you and only touched the surface. I really do thank you for making the journey and for coming out publicly and participating in the work that this committee does.