The Federal Court has found Colonial First State misled members of its FirstChoice Fund on at least 12,978 occasions over nearly two years in relation to switching to its MySuper product.
The court found CFS's communication (via letters and calls) may have encouraged members to stay in FirstChoice instead of switching to the default MySuper product.
The incidents relate to the period between 18 March 2014 and 21 July 2016. The Royal Commission referred the conduct to ASIC in February 2019 and ASIC filed the case a year later, in March 2020. A few months later, in July 2020, APRA imposed licence conditions on CFSL [which continue and were for separate matters, according to CFS].
The court documents state that CFS sent 12,911 letters to FirstChoice members with misleading representations about investment directions, conducting 70 calls with members similar investment directions, and failing to provide a general advice warning on 17 calls.
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The court also declared CFS failed to do all things necessary to ensure the financial services covered by its ASFL were provided efficiently, honestly and fairly.
CFS has agreed to the declarations, and the penalty hearing is set for October 12.
"The misleading or deceptive conduct by Colonial included telling its members that recent legislative changes [MySuper legislation passed in 2012 and effective in 2014] required Colonial to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case," ASIC said in a statement.
"Colonial also failed to tell members that if Colonial did not receive an investment direction from the member, it was required to transfer the member's superannuation contributions into a MySuper product."
CFS hasn't remediated the majority of the affected members yet.
"CFSIL apologises unreservedly to members impacted by these issues. Remediation of the  calls is over 99% complete and is expected to be finalised in October 2021. CFSIL will remediate members affected by the [12,911] letters and is working to complete this as quickly as possible," a spokesperson for the company said.
The matter was a case study in the Royal Commission public hearings.
Commonwealth Bank sold a 55% stake in CFS to KKR, in a transaction expected to complete in the coming months.
CFS's MySuper product FirstChoice was recently named among the 13 funds that failed APRA's first performance test for MySuper members.
On the day CFS was slated to receive the results (and a day before APRA posted the results more widely), it announced a fee cut on FirstChoice Employer.