ASIC is taking Commonwealth Bank and its wealth arm, Colonial First State, to task over $22 million in conflicted remuneration issues which it alleges ran up until June 30 last year.
The corporate regulator has sued CBA, and the investment arm of its wealth business Colonial First State in the Federal Court, alleging Colonial First State Investments Limited (CFSIL) paid more than $22 million in conflicted remuneration to CBA to distribute Colonial's Essential Super product, both digitally and through the bank's substantial branch network.
According to ASIC, around 390,000 Australians became members of the Commonwealth Essential Super fund as a result of the distribution agreement, which ASIC believes amounts to a contravention of the Corporations Act's ban on conflicted remuneration.
ASIC said the arrangements could reasonably be expected to influence the choice of financial product recommended by the bank to its retail clients, or the financial advice it provided them.
|Sponsored by Franklin Templeton|
Market Volatility Centre - Tools to Help Stay the Course
The regulator is chasing civil penalties against the bank and CFSIL, with each contravention attracting a maximum penalty of $1 million.
The case was first raised at the Royal Commission, and ASIC deputy chair Daniel Crennan said the regulator's decision to investigate, based on Commissioner Hayne's referral, demonstrates the regulator's commitment to its Royal Commission litigation program.
Responding via the ASX last night, CBA acknowledged the action brought against it.
"The claim alleges 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 (CES)," the bank said.
"CFSIL and CBA are reviewing ASIC's claim and will provide any further update as required."