ASIC has commenced civil penalty proceedings in the Federal Court of Australia against Commonwealth Bank of Australia and its subsidiary, Colonial First State Investments Limited (CFSIL) in relation to alleged conflicted remuneration paid by CFSIL to CBA between 1 July 2013 and 30 June 2019.
ASIC alleges that more than $22 million in conflicted remuneration was paid by CFSIL to CBA for the distribution of Essential Super, a superannuation product issued by CFSIL. CBA distributed the Essential Super product using its branch and digital channels. Approximately 390,000 individuals became members of the Commonwealth Essential Super fund under the arrangements.
ASIC alleges that the arrangements between CBA and CFSIL breached the ban on conflicted remuneration under ss963E 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. Each contravention attracts a maximum civil penalty of up to $1 million for each of CBA and CFSIL.
Deputy Chair Daniel Crennan QC said ‘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.