Commonwealth Bank might have escaped a royal commission on its scandal-ridden financial planning division but its chairman, David Turner, will be called to address "concerns" in a public forum next year.
The move follows a decision last week by the federal government to reject several recommendations, including a royal commission, as part of its response to a Senate report.
Senator Sam Dastyari, chairman of the Senate economics references committee, has written to the secretariat, requesting that Turner face a public forum.
The bipartisan committee had considered a royal commission necessary and in the interest of the public.
"The committee remains concerned that issues relating to Commonwealth Bank's culture, behaviour and conduct have not been adequately resolved," the letter said.
The Scrutiny of Financial Advice (SOFA) inquiry, launched in July, will be used to investigate these concerns, including CBA's Open Advice Review program.
The compensation scheme is open to any of the bank's 400,000 financial planning customers who believe they might have fallen victim to unscrupulous advice between 2003 and 2012. Unlike customers of Macquarie Private Wealth, who are all being informed about a compensation scheme, CBA's customers have to come forward. Those who have not seen or heard about the ads will not know the scheme exists.
Thousands of people lost their life savings as a result of inappropriate advice given to them by some planners at the country's biggest bank.
Dastyari said in his letter that the committee needed to be satisfied that "all Commonwealth Bank customers" who could be eligible for compensation had their cases appropriately handled.
"Calling the chairman is an unprecedented step – but he is the most senior and the most responsible person in the bank," he told Fairfax Media.
The Future of Financial Advice (FOFA) reforms are yet to be debated in the Senate. The amendments, which effectively wind back some crucial aspects of the reforms, were scheduled to be debated on Wednesday but were withdrawn from the Senate on Thursday. The next sitting is late next month but speculation is rife in the financial planning industry that a debate could be delayed until next year.
The CBA scandal has become an emblem of what is wrong in the financial planning industry, specifically the inherent conflicts of planners tied to or working for the banks and the use of sales targets as incentives.
While there are some very good financial planners who work hard to do the right thing by their clients, vertical integration and the balanced scorecard system means sales targets and commissions or bonuses have not been completely eradicated. The problem with such conflicts is no better illustrated than the recent industry report into life insurance advice by the Australian Securities and Investments Commission, which showed 37 per cent of advice was in breach of the law. It also found that 45 per cent of advice failed when high upfront commissions were taken, compared with a 93 per cent pass rate when other forms of commissions were used. Given a staggering 82 per cent of the industry uses upfront commission arrangements, this is a massive problem.
FOFA and the SOFA inquiry are the latest twists in the continuing saga. While the government may have taken a royal commission off the table on the basis it believed CBA's compensation scheme was good enough, the committee has come back swinging and wants the blowtorch put on it.
The reason is simple, Dastyari says. "There are too many unanswered questions surrounding the Commonwealth Bank. If people have had their lives damaged by the bank's actions – the bank has an indisputable duty to put things right. So far this still has not happened."
These are strong words that show the committee means business. It is understood it has reserved the right to subpoena Turner and other members of the board if they decline to appear. Bringing the board into the fray would allow questions such as what it knew and when. Kennedy joined the CBA board in August 2006 and became chairman in February 2010.
The corporate watchdog, which bore the lion's share of the Senate committee's 61 recommendations, will also be called to account.
CBA whistleblower Jeff Morris, the man who informed ASIC about the scandal in October 2008, will be asked to appear. He has concerns about the compensation scheme and what really occurred inside the bank.
"CBA is still downplaying the full extent of what occurred, in particular the role of management by sticking to the hoary old 'rogue planner' story," he says. "Until they own up to this, who could trust them to compensate the victims fairly?"
Morris joins a growing queue of people who believe a royal commission on white collar crime is necessary. "But another Senate Inquiry is a good start," he says. "I'm confident that what comes out and what will continue to come out will inevitably lead to a royal commission in the not too distant future."
For Morris, what Paul Keating called the "de-spivving of Australia" can begin in earnest.