ASIC has launched an action in the Federal Court against Colonial First State Investments Limited (CFSIL) in its own capacity, as the trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund).
The regulator commenced the proceedings over alleged breaches of the ASIC Act and the Corporations Act, over alleged misleading or deceptive communications with members of the FirstChoice Fund.
In 2012, the government passed amendments to the Superannuation Industry (Supervision) Act 1993 (SIS Act) requiring trustees, to offer members a default “MySuper” superannuation product, with lower fees, simple features and a single diversified investment option or a lifecycle investment option.
The provisions required trustees such as CFSIL to pay default contributions from 1 January 2014 into a MySuper product and transfer “accrued default accounts” (ADAs) from 1 July 2017 to a MySuper account.
ASIC has said that between March 2014 and August 2016, CFSIL mislead or deceived members of the FirstChoice Fund with the provision of investment directions to stay within the fund rather than transitioning over to CFSIL’s MySuper product.
The regulator’s case has focused on template letters sent to members, as well as, 46 telephone calls made in accordance with scripts.
It also alleged that CFSIL failed to provide a “general advice warning” during the telephone calls in breach of s949A of the Corporations Act.
A total of 8,605 members provided an investment direction to keep them in the existing product.
CFSIL’s misconduct was a case study in the royal commission.
ASIC has contended that the communications also amounted to breaches of CFSIL’s obligations to do all things necessary to ensure that the financial services covered by its financial services licence were provided efficiently, honestly and fairly, as required by the Corporations Act; and as a financial service licensee to comply with financial services laws.
The watchdog is seeking declarations of breaches of s12DA of the ASIC Act and ss912A(1)(a) and (c), 949A and 1041H of the Corporations Act and the imposition of civil penalties under ss12DB and 12DF of the ASIC Act in relation to the communications.
The regulator’s action against CFSIL falls within ASIC’s Wealth Management Major Financial Institutions Portfolio, which has focused on Australia’s largest financial institutions (the big four banks and AMP).
The portfolio has zeroed in on conduct issues arising from the Hayne commission, including credit and retail lending, financial advice, fees for no service, superannuation trustees, insurance, unfair contract terms and other licensee obligations.
