The Commonwealth Bank of Australia (ASX: CBA) share price is marginally lower after the bank admitted the Director of Public Prosecutions (DPP) has levelled criminal charges against the bank for 87 alleged contraventions of the anti-hawking provisions of the Corporations Act.
"The alleged contraventions relate to telephone sales of Simple Life insurance products by CMLA in the period 7 October 2014 to 16 December 2014, a practice that ceased at the end of 2014," the bank's statement read.
Generally criminal charges against an entity are far more serious than civil as they can often lead to imprisonment and disgrace, rather than compensation or fines if found liable in a civil dispute.
Criminal charges are also brought by the DPP as the prosecutor for offences against the commonwealth, rather than a civil case between two private parties that does not involve the state or criminal law.
The anti-hawking legislation in the Corporations Act largely prevents cold calling to sell insurance products, with the Hayne Royal Commission recently recommending ASIC's Hawking Guide (RG 38) effectively be translated into law.
Other banks facing criminal charges for allegedly being part of a trading cartel are Deutsche Bank Australia & Australia & New Zealand Banking Group (ASX: ANZ).
While an alleged dividend stripping fraud scam that is being investigated by German prosecutors has threatened to engulf the normally teflon Macquarie Group Ltd (ASX: MQG).
Although CBA is not likely to face a material financial hit as a result of today's charges, those individuals in the firing line face potentially serious consequences.
