The latest compliance issues in wealth management across Asia-Pacific.

Credit Suisse
Credit Suisse is paying $30 million to resolve charges from the US Securities and Exchange Commission that it won investment banking business by corruptly influencing foreign officials.

As reported previously by this news service in early June, the Zurich-listed lender has already agreed to pay a $47 million penalty to US authorities for its breach of the Foreign Corrupt Practices Act. (It is not immediately clear from the SEC statement as to whether the $30 million figure is a new development. This news service has contacted the bank for comment and may update in due course.)

In last week's SEC statement, the financial watchdog said several senior Credit Suisse managers in the Asia-Pacific region sought to win business by hiring and promoting individuals connected to government officials as part of a quid pro quo arrangement.

"While the practice of hiring client referrals bypassed the firm’s normal hiring process, employees in other Credit Suisse subsidiaries and affiliates were aware of it and in some instances approved these `relationship hires' or `referral hires'.  The SEC’s order found that in a six-year period, Credit Suisse offered to hire more than 100 individuals referred by or connected to foreign government officials, resulting in millions of dollars of business revenue," the SEC said.

The SEC’s order finds that Credit Suisse violated the anti-bribery and internal accounting controls provisions of the Securities Exchange Act of 1934.  Credit Suisse agreed to pay disgorgement of $24.9 million plus $4.8 million in interest to settle the SEC’s case.  

ASIC
Financial planner Neil Evans has appeared before the Melbourne Magistrates’ Court and pleaded guilty to one charge relating to vote-rigging in the director elections for WAW Credit Union Co-Operative. 

Evans’ guilty plea followed an investigation by the Australian Securities and Investments Commission.

Between 4 November 2015 and 18 November 2015, WAW conducted elections to fill two vacant board positions. The voting took place electronically, with WAW members using their personal details to gain access to an online portal to cast votes. In an agreed summary of facts tendered to the court, Evans, admitted he misused the personal details of not less than 499 WAW members to gain access to the online voting portal and cast ballots in the election for two candidates without the authorisation of those members.

This meant that one person was improperly elected to the WAW board and another person who should have been elected was not. The court found proven that Evans had committed the offence of causing unauthorised modification to data held in a computer contrary to section 247C of the Victorian Crimes Act.

The court placed Evans on a 12-month good behaviour bond, conditional upon him paying AU$12,000 ($9,000) into the court fund and prohibiting him from providing financial advice to WAW customers for the duration of the bond.

The matter was prosecuted by the Commonwealth Director of Public Prosecutions. ASIC’s investigation into the conduct of the election is ongoing.

CBA, ANZ

ASIC has accepted court enforceable undertakings from the Commonwealth Bank of Australia and Australia and New Zealand Banking Group under which the banks have agreed to change the way they distribute superannuation products to their customers.

ASIC investigated CBA's distribution of its essential super product and ANZ’s distribution of its smart choice super and pension product (Smart Choice Super) through bank branches. 

The financial watchdog found a common practice of offering those products to customers at the conclusion of a fact-finding process about customers’ overall banking arrangements. CBA's fact-finding process was called a “financial health check”. CBA staff also sometimes helped customers roll over their other superannuation into the Essential Super account at the time of distribution. ANZ’s fact-finding process was called an “A-Z review”.

ASIC was concerned that the proximity between the fact-finding process and the discussion about essential super or smart choice super was leading CBA staff and ANZ staff to provide personal advice to customers about their superannuation.  Branch staff for both CBA and ANZ were only authorised to provide general advice. It was concerned that customers may have thought that the CBA branch staff or the ANZ branch staff were considering risks specific to the customer when this was not the case.

These court enforceable undertakings prevent CBA from distributing essential super in conjunction with a financial health check and ANZ from distributing smart choice super in conjunction with an A-Z review. 

They also require CBA and ANZ to each make an AU$1.25 million community benefit payment. If there is a breach of the undertaking ASIC can, under the ASIC Act, apply for orders from the court to enforce compliance.

CBA chose to suspend the distribution of essential super in CBA branches in October 2017.

These actions are part of ASIC’s wealth management project. The project was established in October 2014 to lift the standards of major financial advice providers. The wealth management project focuses on the conduct of the largest financial advice firms in Australia (NAB, Westpac, CBA, ANZ, Macquarie and AMP).