ASIC has sued Commonwealth Bank and its subsidiary Colonial First State (CFSIL) in relation to alleged conflicted remuneration paid by CFSIL to CBA between 1 July 2013 and 30 June 2019.
According to ASIC Deputy Chair Daniel Crennan QC, the proceedings reflect the “ongoing commitment” by ASIC’s Office of Enforcement to bring the royal commission’s referrals and case studies to litigation “when appropriate”.
In this instance, ASIC alleges that more than $22m 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 both its branch and digital channels. Approximately 390,000 individuals became members of the Super fund under the arrangements.
ASIC alleges the arrangement breached the ban on conflicted remuneration as it 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.
As such, ASIC is seeking civil penalties against both CBA and CFSIL with each contravention attracting a maximum civil penalty of up to $1m for both of CBA and CFSIL.
The first hearing is yet to be listed by the court.
On its website, CBA has acknowledged the proceedings by ASIC and says it will “provide any further update as required” after reviewing the regulator's claim.
In June of 2018, CBA announced plans to demerge its wealth management and mortgage broking businesses in totality some time in late 2019.
The demerged business, called CFS Group, was to include CBA’s Colonial First State, Colonial First State Global Asset Management (CFSGAM), Count Financial, Financial Wisdom and Aussie Home Loans businesses.
However, in March of 2019, CBA announced the temporary suspension of the demerger, but failed to provide an alternative timeline.
Colonial First State remains a wholly owned subsidiary of CBA to date.
