The Federal Court has shelved proceedings brought against the Commonwealth Bank of Australia (CBA) and Colonial First State Investments Limited (CFSIL) by the Australian Securities and Investments Commission (ASIC).
ASIC first commenced civil penalty proceedings against CBA and CFSIL in the Federal Court in 2020, after it was alleged that CFSIL paid over $22 million in conflicted remuneration to CBA as its licensee for the distribution of super product, Essential Super.
ASIC said at the time that the arrangements contravened the ban on conflicted remuneration stated in the Corporations Act 2001 (Cth) because they could influence “the choice of financial product recommended by CBA to retail clients or the financial product advice given by CBA to retail clients”.
The arrangements were also the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, after CBA staff signed up over 390,000 individuals to the Essential Super product between 2013 and 2019.
Justice Anderson found CFSIL did not breach the law and that the payments did not “constitute benefits within the definition of conflicted remuneration”, as the “statutory context of the conflicted remuneration provisions were focused on situations such as where a financial adviser had a financial incentive”.
“ASIC pursued this case because we were concerned that the arrangements between Colonial and CBA had the potential to influence the choice of financial product recommended to retail clients or the advice given to retail clients,” Sarah Court, ASIC Deputy Chair, said.
“ASIC will continue to work to ensure retail clients receive appropriate advice, that aligns with their interests.”