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ASIC has launched civil proceedings in the Federal Court against the major bank for alleged payments of banned conflicted remuneration totalling $22 million.
The Australian Securities and Investments Commission (ASIC) has commenced civil penalty proceedings in the Federal Court of Australia against the Commonwealth Bank of Australia (CBA) and its subsidiary, Colonial First State Investments Ltd (CFSIL).
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The charges relate to alleged conflicted remuneration paid by CFSIL to CBA between 1 July 2013 and 30 June 2019.
ASIC has alleged that more than $22 million in conflicted remuneration was paid by CFSIL to CBA for the distribution of Essential Super, a superannuation product offered by CFSIL.
The product was distributed via both CBA’s branch and digital channels.
According to ASIC, approximately 390,000 individuals became members of the Commonwealth Essential Super fund under the arrangements.
ASIC has also alleged that the arrangements between CBA and CFSIL breached the ban on conflicted remuneration under Sections 963E and 963K of the Corporations Act 2001 (Cth) because the arrangements “could reasonably be expected to influence”:
- the choice of financial product recommended by CBA to retail clients; or
- the financial product advice given by CBA to retail clients.
ASIC is seeking civil penalties against both CBA and CFSIL in relation to the alleged misconduct, with contravention attracting a maximum civil penalty of up to $1 million for each of CBA and CFSIL.
Following the announcement, ASIC deputy chair Daniel Crennan QC commented: “This investigation is related to a royal commission referral to ASIC arising from the superannuation round of the hearings.
“This proceeding reflects the ongoing commitment by ASIC’s Office of Enforcement and its Royal Commission Litigation Program to bring the royal commission’s referrals and case studies to litigation when appropriate.”
The Federal Court is yet to list the first case management hearing.
Over the past few years, regulators have moved to ban conflicted remuneration across the financial services sector.
Most recently, the federal government passed legislation to ban conflicted remuneration in the mortgage broking industry, which includes volume-based and soft-dollar remuneration, in line with the Combined Industry Forum’s reforms.
The ban on conflicted remuneration payments to mortgage brokers was initially scheduled to take effect on 1 July 2020 but has been pushed back to January 2021 due to the COVID-19 crisis.
[Related: CBA faces class action over credit insurance]
