The Australian Securities and Investments Commission (ASIC) has initiated court action against the Commonwealth Bank (CBA) with respect to conflicted remuneration around its superannuation products.
The bank has acknowledged to the Australian Securities Exchange that civil proceedings have been brought by ASIC against its wholly-owned subsidiary, Colonial First State Investments Limited (CFSIL).
The bank said the claim alleged “certain contraventions of conflicted remuneration provisions in the Corporations Act relating to the arrangement between CFSIL and CBA for the distribution of Commonwealth Essential Super.
The bank said that CFSIL and CBA were reviewing the ASIC claim and would provide any further update as required.
It is not the first time the Essential Super product has been in the regulatory spotlight with the CBA alongside ANZ in 2018 entering into an enforceable undertaking when ASIC found that bank staff had helped customers roll their super into a bank product, in CBA’s case, Essential Super.
In a media announcement released over 12 hours after CBA's notification to the Australian Securities Exchange, ASIC said it would be allegint 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 said it would be alleging 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 both the choice of financial product recommended by CBA to retail clients or the financial product advice given by CBA to retail clients.
ASIC said it was seeking civil penalties against both CBA and CFSIL in relation to the alleged misconduct with each contravention attracting a maximum civil penaty 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.’
Comments
Could ASIC be any more blatant in its biased approach to super? There have been numerous factual evidence supplied on union owned 'industry' super, along with rorting of fees, conflicted remuneration, incentives, bribes and essentially outright corruption but NIL action taken by ASIC.
However look at how they target any of the powerful opposition to union super; almost zealot-like in their rush to investigate any issues at all. If this isn't evidence of collusion and ASIC being the corrputed watch dog of ISA then I don't know what is.
And ASIC will lose because the bank always wins. Guess who is paying for this legal action? Us independent financial advisers. Im sure somehow CBA and ASIC will find a way to blame us for this too.
Im still amazed that the recent job losses and market downturn hasnt been at least partially blamed on financial advisers.
Wasn't the IOOF case that was thrown out pretty much the same as this?
I don't see Industry funds with many shop fronts wonder how they are getting all the people industry funds into their products? time to investigate these corporate plan representatives are these people Advisers?
If you don't sign up in one particular Industry fund, you can find yourself locked out of the work site permanently. Takes the meaning of "compulsory" to new levels, eh?
Of course, the Union Super funds, who are vertically integrated & pay bonuses to their inhouse intrafund advisers, aren't conflicted. It's like Animal Farm. All animals are equal, but some animals (intrafund advisers) are more equal than others.
There are dealer groups that run vertically integrated models too. The only difference is that it’s the senior manager/ directors and/or private equity firms that own the licensee and the product. They get the clip for inflows from the advisers under the licensee not the advisers. The managers manipulate the advice process and training and advisers drink the “Kool-aid”
My question is why this was allowed to go on for 6 years? Did ASIC let them do this (surely they had knowledge of it), so that they can launch civil action down the track? Why couldn't ASIC cut this off early and work with CBA to stop or alter the arrangement, by taking a facilitative approach? Just seems weird that they now decide its bad and are suing for $$.
On the subject of money, I hope litigation costs don't come out of the adviser levy for this. AND if ASIC win some money, should that be used to reduce the Adviser levy? eg. no payments to Choice and other "consumer" groups.
Choice is a political activist group masquerading as a consumer group. They do not represent the majority of real consumers. It is outrageous they are given money and board positions by the govt. This has to stop now. Tim Wilson?? Andrew Bragg??
all of us should write to tim wilson and get him to chop off choice's funding.
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