CFSIL liable for misleading super members

The Federal Court has declared that Colonial First State Investments Limited (CFS), as trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund), made false or misleading representations and engaged in misleading and deceptive conduct when communicating with members.

The court found that on at least 12,978 occasions, in communication with members of the FirstChoice Fund, Colonial made misleading representations regarding investment directions by encouraging them to stay with the FirstChoice Fund rather than move to the MySuper product.

The misleading or deceptive conduct by CFS included telling its members that recent legislative changes required CFS to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case.

Related News:

CFS also failed to tell members that if CFS did not receive an investment direction from the member, it was required to transfer the member's super contributions into a MySuper product.

Australian Securities and Investments Commission (ASIC) deputy chair, Sarah Court, said: “Superannuation fund members need to receive clear and accurate information to make informed decisions.

“ASIC alleged Colonial made misleading representations which may have impacted members’ decisions about where to keep their funds and may have resulted in members’ funds being kept in higher fee-paying super products that included commissions. These actions did not put members’ interests first.”

The court declared that CFS, between 18 March, 2014, and 21 July, 2016:

  • Engaged in misleading and deceptive conduct by sending 12,911 letters to members containing misleading representations about investment directions;
  • Made false or misleading representations and engaged in misleading and deceptive conduct in 70 calls to members about investment directions;
  • Failed to provide a ‘general advice warning,’ as required by the Corporations Act, in 17 calls to members; and
  • Failed to do all things necessary to ensure the financial services covered by its financial services licence were provided efficiently, honestly and fairly.

CFS consented to these declarations being made and a penalty hearing has been listed for 12 October, 2021.

 




Recommended for you

Author

Comments

Comments

Was CFS doing a bit of intra-fund advice?

Getting people to stay on FirstChoice Fund to pay the higher fees?

Where's the outrage?

I think this case has already been publicised and absolutely it is abhorrent behaviour, no risk. It's actually worse in my opinion then just promoting someone to stay in your fund, because they knowingly knew it was higher fees.

Yes as abhorrent as the union funds that do this daily, but obfuscate their real fees in such a way that no member really can tell what they're paying. And we all know ASIC is either biased or so dumb they're a laughing stock and fooled by the choir boy act that the union fund plays for them.

"....ASIC is either biased or so dumb they're a laughing stock ....".

Well said. Without seeing the ASIC gift register, I suspect we will have to assume a combination of both.

Once again Hedware, you just don't get it.

The question should not be "where's the outrage"? It should be "where's the regulatory action against union funds that do stuff just as bad if not worse"? No-one is trying to excuse CFS or AMP or Westpac when they do something wrong. But when union funds do something wrong they shouldn't be excused either. Particularly not by regulators who are supposed be fair and impartial, but are actually chronically biased.

The supposed "clean bill of health" union funds got at the RC was not because they were investigated and found to be squeaky clean. It's because they were deliberately never investigated.

Industry funds were put on the naughty list by the regulators. So not completely chronically biased regulators.

The banks and the government (resisting a RC all the way) put tight restrictions on the RC terms of reference and a very close deadline to stop the RC digging too deeply. But it backfired. The RC ran out of time. Not the RC's fault in finding so many pre-existing stinks and not getting time to get into the industry funds.

I share your disappointment in the RC not having time to look at the industry funds as both sides of the equation deserved a look. But I have been told by insiders to the RC that the industry funds would have come off in a reasonably good light and that would not have been a good look for the government.

Now you keep using the term 'union funds'. This is not correct. They are called industry funds because half their boards have to be employer representatives. I recall Wilcox of the AIG saying at a lunchtime briefing that he was annoyed that the industry fund employer representatives were always overlooked and that they deserved credit for the positive earnings of their respective industry super funds. For that reason he disliked those industry funds being called union funds.

A bit of history - the industry funds were a negotiated outcome that the employers participated in the Accord and there were benefits to the employers as much to the employees. You can't get someone more on the employers' side than Wilcox. He served (very well from accounts) for 9 years on an industry fund. He has retired from that Board but was asked by the Board's employee representatives not to retire but to continue as a director. If you cant get this correct, then how can your other comments (some of which I like very much) be trusted?

Given their MySuper option was on the naughty list on the recent review maybe it was in the member's best interest to stay where they were.

Yes - excellent point.

This is not what it seems as it's being misreported. Strong Super (MySuper) regs did required RSE to contact members with default accounts (accrued default amounts) to seek direction from members to stay in their current option/fund otherwise be transferred to no frills MySuper (lifecycle). The latter maybe slightly cheaper but will and has proven to product significantly less net lower performance.

Okay here is the real story...https://asic.gov.au/media/tqtobsyd/21-237mr-20210902-statement-of-agreed...

You'll see APRA was fully informed and engaged in process through out and that the Federal Court is arguing on semantics of words used to inform members of the legislative changes "recent", "investment direction required" ect. A complete and utter disgraceful MO from ASIC. You've only bought more distrust for the industry and your own organisation without achieving anything tangible

Add new comment