The Full Federal Court has dismissed ob体育鈥檚 appeal against an earlier Federal Court decision to dismiss ob体育鈥檚 case against the Commonwealth Bank of Australia (CBA) and Colonial First State Investments Limited (Colonial) for allegedly breaching conflicted remuneration laws.
ob体育 alleged in the proceeding that CBA and its wholly owned subsidiary, Colonial, breached conflicted remuneration laws when they reached an agreement in which Colonial paid CBA to distribute its Essential Super product to retail clients through CBA鈥檚 branch and digital channels. Essential Super was distributed to over 390,000 individuals.
ob体育 Deputy Chair Sarah Court said, 鈥榦b体育 pursued this matter because conflicted remuneration has the potential to cause consumers to be given financial product advice that may not suit their needs.
鈥榃hile the Full Court dismissed the appeal it accepted a number of ob体育鈥檚 submissions and, importantly, clarified the meaning and reach of the conflicted remuneration provisions for future matters.鈥�
ob体育 will consider the judgment carefully. ob体育 has 28 days to lodge any application for special leave to appeal to the High Court, should it decide to do so.
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Background
The arrangements between CBA and Colonial 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 ob体育 in the Final Report ().
On 22 June 2020, ob体育 commenced civil penalty proceedings against CBA and Colonial (20-143MR). The proceedings were dismissed on 29 September 2022 (22-264MR).
In the proceedings, ob体育 alleged that the arrangements between CBA and Colonial breached the ban on conflicted remuneration under ss963E and 963K of the Corporations Act 2001 (Cth).
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.
On 26 October 2022, ob体育 appealed the Federal Court鈥檚 decision to dismiss the proceedings (22-293MR).
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鈥檚 response to the 2009 inquiry into financial products and services in Australia by the Parliamentary Joint Committee on Corporations and Financial Services.
ob体育 updated its guidance on conflicted and other banned remuneration (RG 246) in December 2017 (17-421MR).