ASIC loses court bid to CommBank, CFS

The Full Court of the Federal Court of Australia dismissed an appeal brought by the Australian Securities and Investments Commission (ASIC), which had alleged CFS breached the law when it paid CBA to distribute superannuation trust, Essential Super.

ASIC commenced proceedings in June 2020 after Essential Super had been a case study in the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

In September last year, Justice Stewart Anderson found the payments made by Colonial to CBA did not constitute benefits within the definition of “conflicted remuneration”.

He added the statutory context of the provisions were focused on situations 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 at the time.

“ASIC will continue to work to ensure retail clients receive appropriate advice, that aligns with their interests.”

On Thursday morning, the Full Court found Justice Anderson was “correct to conclude the benefits were not conflicting remuneration”.

In addition to dismissing the appeal, ASIC has been ordered to pay the costs of the appeal for CBA and CFS.

ASIC launched the appeal in October 2022, with the corporate regulator concerned that the court’s decision would 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,” Ms Court said.

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.

More to come.