CBA hit with another ASIC suit, AMP fined

ASIC has hit CBA with a third lawsuit in two days and slapped AMP with a fine of more than half a million dollars.

ASIC chairman James Shipton. Picture: AAP

The corporate watchdog has hit Commonwealth Bank with a third lawsuit in two days and slapped wealth major AMP with a fine of more than half a million dollars, as it keeps up its enforcement action despite significant disruption to financial markets.

The Australian Securities & Investments Commission on Monday filed a claim in the Federal Court that CBA’s superannuation arm Colonial First State misled members by attempting to keep savers in a higher-fee pension fund rather than moving them across to a low-fee MySuper account, as was required by law.

The case was examined by Kenneth Hayne’s royal commission, which shone a light on CBA’s communications to 13,000 members of its FirstChoice Fund who failed to have their assets moved across to the new low-fee account by the 2014 deadline.

After it missed the legal deadline, CBA wrote letters to its customers asking them to make a “investment direction” as to whether they wanted to keep contributions flowing into the higher-fee fund. Under the law, no such response or action was required on the part of savers.

ASIC has alleged CBA also failed to provide a “general advice warning” when it called members. As a result of the allegedly deceptive conduct, 8605 members kept their savings in the higher-fee product.

Meanwhile, AMP Life has paid a penalty of $275,500 and AMP Capital has paid a fine of $250,500 after ASIC issued infringement notices on the company over concerns there were breaches of the regulator’s derivative transaction reporting rules between August 2015 and September 2018.

ASIC claimed AMP failed to report information about almost 1100 transactions and hand over collateral information relating to almost 20,000 transactions, and the failure showed “serious inadequacies” in the company’s procedures for monitoring reporting.

AMP did not admit guilt or liability. “The infringement notices issued to AMP Life and AMP Capital are a message to reporting entities to ensure compliance with their reporting and monitoring obligations under the ASIC Rules,” ASIC commissioner Cathie Armour said.

Although ASIC has pledged to take a lighter-touch approach to enforcing the law during the coronavirus pandemic, the regulator on Monday hit CBA with two lawsuits stemming from the royal commission, one involving overcharging and the other involving a credit increase granted to a problem gambler.

CBA said it would likely settle both cases and has apologised.

In an unusual move, ASIC has announced the enforcement actions after the close of trade in order to not induce further panic selling on sharemarkets, and in one of the cases, the regulator even said it would seek a $5m penalty — a guide which it would not normally provide — to steer market watchers away from expecting an unwieldy penalty.

ASIC is filing the cases during the market turmoil as it would soon reach the six-year statute of limitations.

Colonial First State’s failure to move super customers from a high-fee fund to low-fee accounts was a breach of criminal offences in legislation monitored by the Australian Prudential Regulation Authority. However, APRA at the time did not prosecute the offences and instead approved a plan to gradually move the accounts that saw Colonial flout the criminal law for another 3 ½ years.

Since late February, shares CBA, Westpac, NAB and ANZ have shed about $100bn in market capitalisation.