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.’