On 16 March 2020, ASIC commenced civil penalty proceedings in the Federal Court against Colonial First State Investments Limited (CFSIL) in its own capacity, and as the trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund). ASIC commenced proceedings for alleged breaches of the ASIC Act and the Corporations Act regarding alleged misleading or deceptive communications with members of the FirstChoice Fund.
In 2012, the Australian Government passed amendments to the Superannuation Industry (Supervision) Act 1993 (Cth) (SIS Act) requiring trustees, such as CFSIL, to offer members a default "MySuper" superannuation product.
ASIC alleges that, between March 2014 and August 2016, CFSIL communicated with members of the FirstChoice Fund in a misleading or deceptive manner regarding the provision of investment directions to stay within CFSIL's FirstChoice Fund rather than transitioning to CFSIL's MySuper product.
ASIC's case focuses on template letters sent to members, as well as, 46 telephone calls made in accordance with scripts. ASIC also alleges that CFSIL failed to provide a "general advice warning" during the telephone calls in breach of s949A of the Corporations Act. It is notable that a total of 8,605 members provided an investment direction keeping them in the existing product.
ASIC contends 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 s912A(1)(a) of the Corporations Act; and
- as a financial service licensee to comply with financial services laws, as required by s912A(1)(c) of the Corporations Act.
ASIC 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 amount of any penalty will be determined by the Court and each party will be making their own submissions to the Court on the penalty range should ASIC be successful in the proceeding.
The proceeding will be listed for a first case management conference on a date to be fixed by the Court.
MySuper accounts were to offer members a new, simple and cost-effective super account with lower fees, simple features and a single diversified investment option or a lifecycle investment option.
The "MySuper" provisions required trustees such as CFSIL to:
- pay default contributions from 1 January 2014 into a MySuper product (under s29WA of the SIS Act); and
- transfer "accrued default amounts" (ADAs) from 1 July 2017 to a MySuper product (under ss20B, 397 and 398 of the SIS Act).
Trustees were exempt from these requirements where they had received a valid investment direction from members to retain them in a superannuation product rather than transitioning to a MySuper product.
CFSIL's conduct was the subject of a case study by the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. Part of that conduct was referred to ASIC in the Final Report (Volume 2 - Part 2, p 91).
ASIC's action against CFSIL falls within ASIC's Wealth Management Major Financial Institutions Portfolio. The Portfolio focuses on the financial services conduct of Australia's largest financial institutions (NAB, Westpac, CBA, ANZ and AMP) with respect to credit and retail lending, financial advice, fees for no service, superannuation trustees, insurance, unfair contract terms and other licensee obligations, and other conduct arising from the Financial Services Royal Commission.
The first case management hearing has been listed at 9:30am on 14 May 2020 with the proceeding allocated to Justice Murphy.
Editor’s note 2:
The first case management hearing, which was scheduled for 14 May 2020, was vacated and the future timetable of the proceedings dealt with by consent with CFSIL.
The court ordered by consent that:
- ASIC have leave to amend the originating process and concise statement to allow for the inclusion of additional alleged misleading calls made by CFSIL;
- The parties agree on amendments of transcripts regarding the alleged misleading calls to be relied upon by ASIC at trial by 12 June 2020; and
- CFSIL file and serve a concise statement in response to ASIC’s amended concise statement by 26 June 2020.
The matter will be listed for a further case management hearing on a date after 29 June 2020.
Editor's note 3:
On 29 June 2020, further orders by the Court were made by consent with CFSIL.
The Court ordered by consent that:
- CFSIL file and serve a concise statement in response to ASIC’s amended concise statement by 17 July 2020; and
- the matter be listed for a further case management hearing on 29 July 2020 at 9:30am.
Editor's note 4:
On 28 July 2020, further orders by the Court were made by consent with CFSIL.
The Court ordered by consent that:
- ASIC be granted leave to file a statement of claim and further amended originating process;
- CFSIL file and serve a defence to ASIC’s statement of claim by 14 September 2020;
- ASIC file and serve a reply, if any, to CFSIL’s defence by 28 September 2020; and
- The matter be listed for a further case management hearing on 15 October 2020 at 9.30am.
Editor’s note 5:
On 14 October 2020, the case management hearing scheduled for 15 October 2020 was vacated and further orders made by the court.
The court has now ordered that:
- CFSIL respond to ASIC’s request for particulars relating to the defence on or by 23 October 2020;
- ASIC provide CFSIL with a proposed amended statement of claim and any additional transcripts of calls upon which it intends to rely at trial on or by 30 October 2020; and
- The matter be listed for a further case management hearing on 12 November 2020 at 9.30 am.
Editor's note 6:
On 12 November 2020, the court made a series of timetabling orders to progress the proceedings. The proceedings will be listed for a further case management hearing on 24 March 2021.
Editor's note 7:
The parties appeared at the case management hearing on 24 March 2021 before Justice Murphy.
The Court has ordered that the matter be set down for trial on 6 September 2021 on an estimate of 3 days.
The parties are to complete a number of steps towards trial, including exchange of evidence, and filing of a court book.
Editor's note 8:
On 12 October 2021, the parties made submissions on penalty before Justice Murphy. The Court’s decision is reserved.