On Wednesday the Commonwealth Bank of Australia (ASX: CBA) share price finished the day 0.5% higher despite the bank confirming that it has been served with a class action.
In a late announcement, the bank advised that class action proceedings concerning investment in cash and deposit options in certain funds have been filed by Slater & Gordon Limited (ASX: SGH) in the Federal Court of Australia against it and its subsidiary Colonial First State Investments Limited.
What is happening?
According to a media release by Slater and Gordon, this is the first class action of its Get Your Super Back campaign.
It believes that the claim could exceed $100 million and include hundreds of thousands of superannuation members. The case will be funded by Augusta Ventures Limited, one of the largest global litigation funders.
The action will allege that Colonial First State invested the retirement savings of its members with its parent bank, Commonwealth Bank, where it received uncompetitive bank interest rates.
Slater and Gordon's head of class actions, Ben Hardwick, said:
"We will allege that by dumping members' super with its parent bank, the CBA, Colonial First State failed to obtain the most competitive interest rate available for its members invested in cash-only investment options and balanced options where there is a cash component."
He went on to explain that the class action will allege there is no excuse for Colonial First State to accept such a low rate from its parent when higher rates could have easily been obtained elsewhere.
Before adding that: "A superannuation fund trustee is obligated to act in the best interests of its members, not its parent company. That's the law. This class action will allege Colonial First State placed the interests of its members beneath the interests of the Commonwealth Bank."
Both Commonwealth Bank and Colonial First State will vigorously defend the proceedings.
What now?
This class action was not unexpected and I believe any potential claim has already been factored into its shares now.
Because of this, I wouldn't let the news put you off an investment. Though, in my opinion, I think that Australia and New Zealand Banking Group (ASX: ANZ) and Westpac Banking Corp (ASX: WBC) shares are trading at more attractive prices.
