The final report of a Senate inquiry into the performance of the Australian Securities and Investments Commission (ASIC) has called for a royal commission to be launched to further investigate the Commonwealth Bank's wealth management arm for forgery and the attempt to cover up its wrongdoing.
The Senate Economics References Committee final report (PDF) found thousands of customers lost money between 2006 and 2010 as a result of the "reckless sales-based culture" of the Commonwealth Financial Planning Limited (CFP).
"There was forgery and dishonest concealment of material facts," the report said. "Clients lost substantial amounts of their savings when the global financial crisis hit; the crisis was also used to explain away the poor performance of portfolios."
"Meanwhile, it is alleged that within CFPL there was a management conspiracy that, perversely, resulted in one of the most serious offenders, Mr Don Nguyen, being promoted."
Committee chair Labor Senator Mark Bishop has described the past practices of CFPL as "appalling".
"This is not a recommendation that the committee has made lightly, but the evidence the committee has received is so shocking and the credibility of both ASIC and the CBA is so compromised that a Royal Commission really is warranted," he said.
"The CBA's focus is on downplaying the extent of wrongdoing and minimising the amount of compensation it has to pay. Meanwhile, ASIC has shown that it is not sufficiently sceptical of the CBA's actions and cannot hold it to account.
"The CFPL scandal needs to stand as a lesson for the entire financial services sector. Firms need to know that they cannot turn a blind eye to rogue employees who do whatever it takes to make profits at the expense of vulnerable investors."
In May, Commonwealth Bank defended itself saying in a statement: "We remain extremely disappointed that a number of former CFPL and FWL [Financial Wisdom] advisers did not provide quality advice to some customers in the past.
"The Group has no tolerance for behaviour that prejudices the financial wellbeing of our customers. We have worked with affected customers to put things right, remediating them to the position they would have been in had they received appropriate advice."
The bank also reassured that its CFPL business had "significantly transformed" and that it had "undergone structural, cultural and management changes, with robust systems and processes in place for the supervision and monitoring of advisers."
Despite this, the committee noted in the report that it is still yet to be convinced about the compensation the bank has provided to affected customers was sufficient.
"The committee is concerned that there are potentially many more affected clients that have not been fairly compensated," the report said.
The committee's report also makes 61 recommendations aimed at ASIC suggesting how it can improve its position as regulator, such as improving its communication with retail investors and consumers. This is in light of the report noting that until as recent as May 2014, ASIC was unclear about how affected customers were being compensated.
"This inquiry has been a wake-up call for ASIC," the report said.
Since 2008, the bank, being arguably Australia's largest, has already spent in excess of AU$580 million in revamping its IT infrastructure, including delivering the bank's core banking modernisation project. The bank also introduced real-time settlement and banking, mobile banking app Kaching, and its point-of-sale platform Pi. CBA was also responsible for launching Australia's first cardless ATM cash withdrawal service.
Despite the committee's recommendation, the Commonwealth Bank's shares finished up on the day.