The Australian Securities And Investments Commission (ASIC) is suing the Commonwealth Bank and subsidiary Colonial First State Investments over a banking royal commission finding that the latter paid the bank to promote a superannuation product to customers.
ASIC claims Colonial paid $22 million to CBA in what is called ‘conflicted remuneration’ to distribute the Essential Super product to customers from 2013 to 2019.
Conflicted remuneration is defined as any benefit that could influence the advice given to clients. The payments are banned.
About 390,000 people were sold the product, with the bank using branch staff and online channels to promote Essential Super.
CBA says it is reviewing ASIC’s claim.
The Essential Super product was created shortly before most superannuation providers were required in 2014 to offer a simpler, low-fee produce called MySuper.
The banking royal commission heard that when Colonial call centre operators called customers about changes to superannuation, they did not mention the possibility of contributions going to a MySuper product.
The commission also heard Commonwealth branch staff often sold Essential Super to customers under the guise of a “financial health check”.
These staff were only allowed to offer general advice, but ASIC believes personal advice was given, which recommended Essential.
ASIC is seeking civil penalties for each breach of the Corporations Act, which can result it fines of up to $1 million for each breach.
The regulator has not specified how many breaches occurred.
The banking royal commission, which uncovered widespread wrongdoing among the financial services industry, detected the alleged breaches and referred them to ASIC. Its final report was handed down last year.
A number of financial services providers have already faced court action as a result of the commission findings.
Court dates for the Commonwealth Bank matter have yet to be set.