ASIC takes 2 CBA units to court on systemic compliance failures

The Australian Securities and Investments Commission started civil proceedings against two Commonwealth Bank of Australia units over systemic compliance failures, including allegedly overcharging brokerage fees on thousands of occasions and making false or misleading representations.

The securities regulator alleged that Commonwealth Securities Ltd., or CommSec, and Australian Investment Exchange Ltd. violated market integrity norms relating to systemic compliance failures in the delivery of financial services. Among other claims, ASIC alleged the company overcharged brokerage fees to customers on 120,933 occasions totaling A$4.4 million between August 2010 and February 2020. The units have admitted the violations.

CommSec did not have appropriate system filters to detect possible trades where there would be no change of beneficial owner, in addition to failing to enter into the required warrant agreement forms with clients and provide an explanatory booklet before accepting an order to buy a warrant on the market for the first time.

The CBA subsidiaries failed to comply with their best execution policies and procedures and did not offer accurate confirmations to customers for certain market transactions, among others, the ASIC alleged.

In a statement, CBA apologized to its affected customers and said CommSec and Australian Investment Exchange do not intend to defend the proceedings. The units have agreed with the regulator to enter into a court-ordered compliance program, which will involve a review by an independent expert.

The bank noted that the issues arose from errors such as information technology system coding or systems issues, human error and data entry errors. It added that CommSec has paid total remediation of A$6.5 million comprising refunds and other compensation payments to customers affected by the issue.