CommSec accepts $20m fine for ‘significant’ overcharging over 10 years, subject to court approval

CBA’s trading plan CommSec has agreed to pay a $20m fine for ‘significant’ overcharging over a decade, subject to court approval.

CBA’s trading plan CommSec has agreed to pay a $20m fine for ‘significant’ overcharging over a decade, subject to court approval. Picture: Toby Zerna

The corporate regulator says Commonwealth Bank’s share trading platform CommSec should pay a $20m fine for overcharging customers over a decade.

The Australian Securities and Investments Commission will also hit AUSIEX – previously owned by the bank and known as CommSec Adviser Services – with a $7.1m fine for related breaches. AUSIEX is now owned by Nomura.

Sarah Pritchard SC, appearing for ASIC before Federal Court judge Wendy Abraham on Thursday, said CommSec and AUSIEX had agreed to pay the penalties.

The agreed fines had been discounted by 30 per cent because CommSec and AUSIEX co-operated with ASIC during its investigation, said Dr Pritchard.

ASIC alleged in March last year that CommSec had contravened market integrity rules by overcharging brokerage fees 120,933 times from 2010 to 2020. The regulator said the amount and duration of overcharging by CommSec was “significant”.

Documents filed in the Federal Court said 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 could only seek penalties for breaches that took place on or after March 1, 2015.

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

Dr Pritchard said CommSec had already paid $6.5m in remediation to affected customers but should still pay a fine for the alleged overcharging because it was “not limited or isolated in nature”. “While it only affected a small percentage of domestic equity accounts … it occurred over a range of areas and was therefore systemic,” Dr Pritchard said.

Elizabeth Collins SC, for CommSec and AUSIEX, said the bank “unreservedly apologises” for the overcharging and would not fight ASIC’s proposed penalty.

The overcharging was caused by several “coding errors” which CommSec had addressed after a “significant overhaul” of its brokerage systems, said Ms Collins. She said the issues only affected a “very small percentage” of the business, less than 1 per cent of client accounts.

CommSec only made $4.4m in profit from the alleged overcharging, which Ms Collins said the judge should consider in deciding the appropriate fine.

The breaches allegedly did not come to anyone’s attention until at least January 2017 when CommSec first notified ASIC. 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.

The regulator contended 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 claimed.

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

Justice Abraham has reserved her decision on whether to approve the fines.