In a statement, the Australian Securities and Investments Commission (ASIC) said the Federal Court had dismissed its case against Commonwealth Bank (CBA) and Colonial First State Investments Limited (Colonial) related to alleged conflicted remuneration paid between 2013 and 2019.
The court found that Colonial did not breach the law when it agreed to pay CBA to distribute Essential Super.
The arrangements between Colonial and CBA regarding the distribution of Essential Super were the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Justice Anderson found that the payments made by Colonial to CBA did not constitute benefits within the definition of “conflicted remuneration”. He further highlighted that the statutory context of the conflicted remuneration provisions was 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. ASIC will carefully consider the judgment,” ASIC deputy chair Sarah Court said.
“ASIC will continue to work to ensure retail clients receive appropriate advice, that aligns with their interests.”
CBA staff signed up over 390,000 individuals to the Essential Super product between July 2013 and June 2019.
Back in 2020, at the commencement of ASIC’s proceedings, the corporate regulator said it believed the arrangements between CBA and Colonial breached the ban on conflicted remuneration under ss963E and 963K of the Corporations Act because the arrangements could reasonably be expected to influence the choice of financial product recommended by CBA to retail clients, and the financial advice given by CBA to retail clients.
“ASIC is seeking civil penalties against both CBA and CFSIL in relation to the alleged misconduct,” the regulator said at the time.
Each contravention was said to attract a maximum civil penalty of up to $1 million for each of CBA and Colonial.
[quote=defundASIC]Another ASIC fail. I wonder whether the poor financial advisers paid for this court case, and CBA’s costs, via the ASIC levy?[/quote]
Too much, as usual.
The lawyers are the winners. As usual.
I wonder if asic will prosecute the industry super funds for flogging their own products. Or are they exempt like everything else
Yes, and Ms Levy’s recommendations, if implemented will magnify conflict within industry super. What an absolute farce this industry has become. Noses in the trough everywhere and most are product floggers.
Yes, Levy is looking like a well behaved puppet of the product providers. I guess her career would take a hit and work would dry up real quick if she went against the product providers – but I could be wrong.
So does this mean that a major premise of the royal commission is now invalid?
ASIC fails again, not surprising. But what do they care, they use the adviser levy as an open cheque book to chase these cases, and all the lawyers involved get paid regardless of the outcome.
Ah at last a Court tests out ASICs version of what is conflicted remuneration.
According to the ASIC media massaging, the reason their case failed is that the judge ” further highlighted that the statutory context of the conflicted remuneration provisions was focused on situations such as where a financial adviser had a financial incentive”. So CBA staff receiving “incentives” from CFS were not advisers receiving “financial incentives” ????
Now I’m just a bush lawyer, but this seems to be a dependence upon whether or not there was actually an adviser involved and whether that adviser had a “financial incentive”, and indeed a test on what an adviser’s “financial incentive” may actually be, before the ASIC rules on conflict can be applied to any adviser. In the CFS case, the courts decided that the bank employees funnelling people off the CFS could not be deemed as “advisers”. Go figure?
Those bank tellers and counter staff that collected nice little “commissions” from CFS may not be technically licensed advisers, but I would bet that the average punter that took the message and made the phone call the CFS thought they might have received “advice”, purely because it came from an employee of a financial institution of certain integrity
Then, If a referral fee back to the parent bank employee, or their bonus schemes, from CFS was not a “financial incentive” then what is?
ASIC is in charge of the Corporations Act and any drafting of it is a direct response to their representations to the legal people in a AGs. ASIC must have known, or should have known, that their desperate attempts to stop commissions being paid to advisers on investment products was always flawed, but the provision has been allowed to stay for years in the Act without a challenge until now, probably because ASIC like the banks, and hate self-employed advisers.
SO Advisers have to pay for this misguided case????
Right result, move on to the next law suit and then the next one. Money. Money. Money.
Another ASIC fail. I wonder whether the poor financial advisers paid for this court case, and CBA’s costs, via the ASIC levy?