ASIC has appealed the Federal Court's decision to dismiss ASIC's proceedings alleging that Colonial First State Investments Limited (Colonial) and Commonwealth Bank of Australia (CBA) breached conflicted remuneration laws.
ASIC had alleged that Colonial and CBA breached conflicted remuneration laws when they reached an agreement in which Colonial paid CBA to distribute its Essential Super product through CBA's branch and digital channels. Essential Super was distributed to over 390,000 individuals.
The Federal Court dismissed ASIC's proceedings on 29 September 2022 (22-264MR).
ASIC Deputy Chair Sarah Court said 'We have appealed this decision because we are concerned that it will limit the operation of conflicted remuneration laws introduced in 2012. Conflicted remuneration has the potential to cause significant consumer harm because it can prevent consumers from receiving appropriate advice and financial products free of influence.'
The conflicted and other banned remuneration provisions were introduced in June 2012 as part of the Future of Financial Advice reforms, representing the Australian Government's response to the 2009 Inquiry into financial products and services in Australia by the Parliamentary Joint Committee on Corporations and Financial Services.
The appeal will be heard by the Full Federal Court on a date to be determined.
Background
On 22 June 2020, ASIC commenced civil penalty proceedings against CBA and Colonial (20-143MR). The proceedings were dismissed on 29 September 2022 (22-264MR).
In the proceedings, ASIC alleged that the arrangements between CBA and Colonial breached the ban on conflicted remuneration under ss963E and 963K of the Corporations Act 2001 (Cth) because the arrangements could reasonably be expected to influence:
- the choice of financial product recommended by CBA to retail clients; or
- the financial product advice given by CBA to retail clients.
Conflicted remuneration is defined in the Corporations Act as any benefit, whether monetary or non-monetary, given to an Australian financial services licensee who provides financial product advice to persons as retail clients that, because of the nature of the benefit or the circumstances in which it is given could reasonably be expected to influence:
- the choice of financial product recommended by the licensee or representative to retail clients; or
- the financial product advice given to retail clients by the licensee or representative.
ASIC updated its guidance on conflicted and other banned remuneration (RG 246) in December 2017 (17-421MR).
