The Federal Court has ordered Colonial First State Investments Limited (CFSIL), as trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund), to pay a penalty of $20 million for misleading communications with members.
The court previously declared CFSIL had breached the Australian Securities and Investments Commissions (ASIC) Act and Corporations Act when communicating to members on at least 12,978 occasions.
According to the regulator, the misleading or deceptive conduct by CFSIL included:
- Telling its members that legislative changes required CFSIL to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case; and
- Failing to tell members that if CFSIL did not receive an investment direction from the member, it was required to transfer the member's superannuation contributions into a MySuper product.
ASIC deputy chair, Sarah Court, said: “The $20 million penalty handed down to Colonial is a timely reminder to superannuation trustees not to mislead members for their own benefit. Trustees have an obligation to provide their members with balanced and accurate information that enables them to make informed decisions about their retirement savings.
“Superannuation represents the future financial security of all Australians. We want to see funds operate in a way that is fair for members and promotes confidence in superannuation.”
According to ASIC, in his decision, Justice Murphy found that the conduct of CFSIL “involved false or misleading representations made to approximately 13,000 members of the fund, in a concerted campaign which went on for more than two years” and that “its contravening conduct involved, in effect, seeking to take advantage of members whose interests it was, as trustee of the fund, duty-bound to protect".
CFSIL was also ordered to publish an Adverse Publicity Order and to pay ASIC’s costs.
In a statement, Kelly Power, chief executive of CFS Superannuation, said: “We have apologised unreservedly to members impacted by these historical issues and have taken action to fix past breaches including by compensating affected members, with interest.
“In the past three years, we have put every effort into improving quality and management oversight, implementing regulatory reforms and making important improvements to our business following issues identified in the Royal Commission.
“As we finalise the process of establishing CFS as a standalone business, we are making significant investments to be a better business with members’ interests at the heart of everything we do.”