ASIC sues CBA and wealth subsidiary over conflicted pay
The corporate regulator has begun court action against the Commonwealth Bank and its former wealth subsidiary Colonial First State over conflicted pay.
“This investigation is related to a Royal Commission referral to ASIC arising from the superannuation round of the hearings,” ASIC deputy chair Daniel Crennan said in a statement.
ASIC alleges that more than $22 million in conflicted pay was paid by Colonial First State to the bank to distribute its product Essential Super through the bank’s branch and digital channels.
Under the deal, which ran from July 2013 to June last year, about 390,000 people were signed up to the product.
ASIC alleges that the arrangements between the two businesses breached the ban on conflicted remuneration under ss963E and 963K of the Corporations Act 2001 (Cth) because the arrangements 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 Commonwealth Bank has since offloaded 55 per cent of the wealth management business but remains responsible for any ongoing legal action.
ASIC is seeking civil penalties against CBA and Colonial First State in relation to the alleged misconduct.
Each contravention attracts a maximum civil penalty of up to $1 million each for the bank and wealth management businesses.
In a statement to the Australian Securities Exchange, CBA said that it acknowledges that civil proceedings have been brought by ASIC against the bank and Colonial First State adding that both businesses were reviewing the claim and will provide further update as required.
“This proceeding reflects the ongoing commitment by ASIC’s Office of Enforcement and its Royal Commission Litigation Program to bring the Royal Commission’s referrals and case studies to litigation when appropriate,” Crennan said.