ASIC loses key RC case against CFS

Mike Taylor

Managing Editor and Publisher

29 September 2022

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.