ASIC targets CommSec, AUSIEX alleging ‘significant’ overcharging

The corporate watchdog has taken CBA’s CommSec to court for overcharging millions in brokerage fees over a decade.

CommSec and AUSIEX do not intend to defend the ASIC proceedings and have entered into a court-ordered compliance program.

The corporate regulator has launched court action alleging Commonwealth Bank’s share trading platform CommSec and its service provider, AUSIEX, overcharged customers $4.3m between 2010 and 2020.

The Australian Securities & Investments Commission kicked off proceedings in the Federal Court on Monday alleging a litany of “systemic compliance failures” from the two businesses.

ASIC alleges CommSec and AUSIEX contravened market integrity rules by overcharging brokerage fees 120,933 times over the almost 10-year period.

Commonwealth Bank has refunded $5.1m to customers affected, including interest.

The court documents state that between 2010 and 2018 at least 9918 CommSec accounts were wrongfully charged $29.95 for trades on 74,874 occasions when they should have been charged $19.95. Some were charged even greater amounts.

However, due to limitations, ASIC is only able to seek penalties for breaches that took place on or after March 1, 2015.

CommSec and AUSIEX do not intend to defend the proceedings and have entered into a court-ordered compliance program.

ASIC is seeking declarations of contraventions, pecuniary penalties and other orders against CommSec and AUSIEX.

Potential penalties are unknown as this is the first time ASIC has sought pecuniary penalties for the offences. However, the Corporations Act specifies a pecuniary penalty of up to $200,000 per contravention.

The action against the CBA subsidiaries comes after ASIC targeted National Australia Bank, alleging unconscionable conduct and misrepresentation of account fees to its customers.

The regulator alleges NAB overcharged customers by $365,454 over 195,305 occasions.

Monday’s action against CBA comes after seven previous actions against CommSec since 2012 drew fines of $1.05m for previous failures.

In 2013, CommSec was subjected to a court enforceable undertaking for client money and trust account failings.

CommSec managing director Richard Burns.

A statement of facts notes the breaches did not come to anyone’s attention until at least January 2017 when CommSec and AUSIEX first notified ASIC.

The breaches were reportedly due to problems arising from defective system coding, human error and data entry error.

The regulator received 63 notifications for breaches by CommSec and AUSIEX between January 2017 and August 2020 for incorrect brokerage fee charges, breaches of client money requirements and trust account reconciliation rules.

ASIC said “the number, breadth and duration of the conduct is significant and indicates the entities did not have adequate systems and processes in place to ensure compliance with their relevant obligations under their Australian Financial Services licence.”

ASIC alleges CommSec and AUSIEX repeatedly failed to comply with client money reconciliation requirements and did not provide accurate confirmations to customers for certain market transactions.

Between 2015 and 2019, 206,404 CommSec confirmations were affected, while 22,088 AUSIEX confirmations were also affected.

The regulator contends the two businesses did not have appropriate system filters to detect possible trades where there would be no change of beneficial owner.

At least 49 transactions where there would be no change of beneficial ownership were wrongfully executed on the market during the period in question.

ASIC also alleges the two businesses failed to include the required intermediary identification in regulatory data submitted to relevant market operators, among other breaches.

In a statement CommSec managing director Richard Burns apologised to customers who had been impacted by the wrongful overcharges.

“These errors never should have happened,” he said.

“We acknowledge the importance of meeting our compliance obligations and we are committed to continuing to invest in strengthening our systems and procedures.”