Macquarie Private Wealth's offer of compensation to 160,000 customers who may have received poor financial advice will include "sophisticated" and “wholesale" investors, the corporate regulator has pledged.
Allegations that Macquarie Private Wealth misclassified retail clients as sophisticated ones to bypass paperwork and stricter regulations, and enable it to sell them riskier investments "concerned" the Australian Securities and Investments Commission, deputy chairman Peter Kell said.
ASIC announced a new compensation scheme as part of an enforceable undertaking it had entered into with Macquarie in January last year after its investigation found "serious concerns" about advice practices and adherence to compliance and financial services laws.
The remediation program will involve Macquarie writing to any customer it has had on its books who has received advice since it was granted a financial services licence in 2004.
The scheme follows a BusinessDay investigation earlier this month that revealed hundreds – possibly thousands – of Macquarie clients might have been misclassified as sophisticated or wholesale investors, instead of retail ones.
Those customers possibly include Sydney's Don Waller, who pumped more than $200,000 into doomed funds run by Basis Capital, which ultimately invested in toxic collateralised debt securities, although Macquarie says he was treated as a retail investor.
It has said it will complain to the Press Council.
BusinessDay also revealed in its investigation that experts, hired to comb through MPW's records as part of an enforceable undertaking the group signed with ASIC in January 2013, continue to find files that fail to meet minimum standards.
Problems include missing statements of advice, failure to show any research was undertaken as to the client's needs and problems with the treatment of self-managed super funds.
Asked if customers who were classified as wholesale or sophisticated would be covered by the compensation program, Mr Kell said: "Yes, that will certainly cover off that issue."
"One of the issues that the independent expert will be assessing is how that will be dealt with, but that will be captured under the overall program".
The letter to clients, which Macquarie began sending out this week, said: "as required by the Enforceable Undertaking, we are reviewing client files where we have identified concerns, such as some clients receiving advice that may not have been appropriate.
"Other measures will also be considered, such as checking that clients' asset allocation is appropriate for their risk appetite."
Current and former clients with "any concerns" are invited to raise them with Macquarie.
Macquarie has pledged to "remediate" clients that were "adversely affected due to the failings" of advisers.
Under the process, the advice they received will first be looked at by an internal Macquarie case manager, who will decide if it was appropriate and assess any damage.
A review committee will make the final decision on whether to offer compensation.
However, clients who remain unhappy with the process will be offered up to $5000 each to obtain independent advice and will also be able to go to the Financial Ombudsman Service (FOS).
Macquarie said it will "waive any time or monetary limits that usually apply at FOS".
Neither Mr Kell nor Macquarie spokeswoman Lisa Jamieson would estimate the cost of the scheme.
However, if just a fraction of customers were to take up the $5000, for example, 20,000 customers, this would cost $100 million.
Mr Kell said the remediation process would not be finished when the enforceable undertaking expires on January 29, 2015.
However he rejected the suggestion that this would mean ASIC would be unable to enforce any compensation process.
"If the remediation program is not undertaken appropriately, we will step in and use powers such as licence conditions or taking Macquarie to court to ensure that that happens," he said.
