Federal Court shuts down ASIC appeal

The Full Federal Court has dismissed the appeal made by the Australian Securities and Investments Commission against an earlier decision by the court to dismiss ASIC's case. The case involved allegations of breaching conflicted remuneration laws against the Commonwealth Bank of Australia and Colonial First State Investments Limited.

ASIC had claimed that CBA and its subsidiary, Colonial, violated conflicted remuneration laws through an agreement where Colonial paid CBA to distribute its Essential Super product to retail clients through CBA's branch and digital channels. This distribution was made to over 390,000 individuals.

“ASIC pursued this matter because conflicted remuneration has the potential to cause consumers to be given financial product advice that may not suit their needs,” said Sarah Court, ASIC deputy chair. “While the full court dismissed the appeal it accepted a number of ASIC’s submissions and, importantly, clarified the meaning and reach of the conflicted remuneration provisions for future matters.”

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ASIC said it would carefully review the judgement and has a 28-day window to lodge any application for special leave to appeal to the High Court, should it choose to do so.

The distribution arrangements between CBA and Colonial for Essential Super were examined during a case study conducted by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. This conduct was subsequently referred to ASIC in the final report of the Royal Commission.

ASIC initiated civil penalty proceedings against CBA and Colonial on June 22, 2020, alleging that their arrangements breached the ban on conflicted remuneration under sections 963E and 963K of the Corporations Act 2001. However, these proceedings were dismissed on Sept. 29, 2022. ASIC appealed the decision in October.

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