Australian banking major Commonwealth Bank has reportedly refused that it is facing penalties that could expand into billions of dollars post accusation of 390,000 breaches through superannuation sales. The Australian Securities and Investments Commission has alleged that CBA had secured $22 million in illicit fees over a period of six years by pressing its Essential Super product on to customers via its bank branches and online platform.

According to a CBA spokesperson, it would be deluding to say that the bank faces billions of dollars in penalties. He has also stated that it is too early to speculate the amount of the civil penalty if at all awarded by the federal court.

As per sources, the payment of fees to CBA for selling the product breaks laws against conflicted remuneration. These laws have been formulated to prevent financial institutions from forcing unsuitable investments on to customers. Each of the 390,000 breaches carries a penalty of around $1 million. The ongoing lawsuit has been referred from Kenneth Hayne’s Banking Royal Commission set up in 2018.

Daniel Crennan QC, Head of Enforcement at Asic, has opined that the proceeding reflects the commitment by Asic’s Royal Commission Litigation Program and its Office of Enforcement to bring the Royal Commission’s case studies and referrals to litigation when considered suitable.

For the record, Commonwealth Bank had initiated the sale of its Essential Super product through its online platform and bank branches from June 27, 2013. The sale was continued online till July 2018 and through CBA’s branches until October 2017. CBA has apparently shared its sale proceeds with Colonial First State, the bank’s superannuation subsidiary, which is also anticipated to be Asic’s target.

Sources claim that the government had banned conflicted remunerations in 2012 under the ‘Future of Financial Advice Reforms’.

A date for an initial hearing from CBA has not yet been declared by the court.

Source Credits:

https://www.theguardian.com/news/2020/jun/23/commonwealth-bank-faces-billions-in-fines-after-alleged-390000-breaches-selling-superannuation