ASIC loses key RC case against CFS
The Australian Securities and Investments Commission has lost a key legal action against Colonial First State and the Commonwealth Bank resulting from the Royal Commission.
ASIC said today that the Federal Court had dismissed proceedings it had brought alleging breaches of conflicted remuneration laws, finding Colonial First State Investments Limited did not breach the law when it agreed to pay the Commonwealth Bank to distribute Essential Super.
The arrangements between Colonial and CBA regarding the distribution of Essential Super was the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The conduct was referred to ASIC in the Final Report.
In the Federal Court, Justice Anderson found that the payments made by Colonial to CBA did not constitute benefits within the definition of ‘conflicted remuneration’. His Honour highlighted that the statutory context of the conflicted remuneration provisions were focused on situations such as where a financial adviser had a financial incentive.
CBA staff signed up over 390,000 individuals to the Essential Super product between July 2013 and June 2019.
ASIC Deputy Chair Sarah Court said ‘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.
Funded by Advisers all over Australia…
Those dumbass ambulance chasers will be next…
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 to 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 to 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 paid 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, and its interpretation, has been allowed to stay for years in the Act without a challenge until now, probably because ASIC like to favour the banks, and hate self-employed advisers.
So CBA staff signed up 390,000 customers for no incentive? Even if no bonus or other form of commission was paid, is it not an incentive to retain your employment by complying with directives from management? Did the management receive bonuses for directing staff to sell CFS product?
This decision, in my view, suggests that the ban on commission introduced around 2013(approx) was in fact invalid law and an unreasonable restriction on “free enterprise”!!! AND whilst mortgage brokers have retained trailer commission, financial advisers have not!! Surely someone in parliament will soon wake up and see that the problem was always VERTICAL INTEGRATION. Instead of brutally reguating from the bottom up (advisers) why, why, why was the obvious solution not implemented, PRODUCT OR ADVICE but never BOTH? A simply prohibition on product manufacturers/providers also providing advice (due to the obvious conflict of interest) is all that was needed!!! Perhaps the source of the problem is that members of parliament are not appropriately educated or qualified. Maybe they should be required to have a relevant degree and pass an exam before thay can be a candidate or if elected before thay can take their place in parliament. Petrhaps this would limit the number of “popular idiots” that get into parliament.
Long live VERTICALLY INTEGRATED PRODUCT FLOGGING.
Aren’t the ducks lining up beautifully to see the big Banks & Industry Super to flog more product than ever via uneducated, unqualified, unlicensed & unregulated call centre jockeys.
No CBA/CFS fan but kinda glad the corrupt ASIC got their ass kicked. I would be dead if i held my breath in anticipation of them ever attempting to look at let alone investigate or take to court any of the well documented cases of corrupt conflicted remuneration within Union super funds, the Unions and Labor…