The Commonwealth Bank of Australia (ASX: CBA) share price could be one to watch on Tuesday after a late announcement out of the banking giant on Monday afternoon.
What did Commonwealth Bank announce?
After the market close on Monday, Commonwealth Bank announced that it had been hit with further civil action.
According to the announcement, civil proceedings have been brought by the Australian Securities and Investments Commission (ASIC) against the banking giant and its wholly owned Colonial First State Investments Limited business.
Colonial First State is a provider of superannuation, investment, and retirement products to individuals and corporate and superannuation fund investors. It is also the operator and administrator of investment platforms.
In May, Commonwealth Bank announced that it had entered into an agreement to sell a 55% interest in Colonial First State to KKR. The transaction implies a total valuation (on a 100% basis) of $3.3 billion, which will result in the bank receiving cash proceeds of approximately $1.7 billion from KKR if the deal completes next year.
What is ASIC alleging?
The civil proceedings that have been brought by ASIC are based on findings during the Royal Commission.
The corporate regulator alleges certain contraventions of conflicted remuneration provisions in the Corporations Act relating to the arrangement between the two parties for the distribution of Commonwealth Essential Super.
Here's a snippet from the Royal Commission hearing:
"Counsel Assisting submits that it is open to the Commission to find that the Distribution Agreement between CBA and CFSIL may have contravened the conflicted remuneration provisions of the Corporations Act."
"This is because the Distribution Agreement provides for a benefit (an annual fee of 30% of the total net revenue earned by the trustee in relation to the fund) given to an AFS licensee (CBA) which, in Counsel Assisting's submission, could reasonably be expected to influence the financial product advice given by CBA to its retail clients."
The bank and Colonial First State are reviewing ASIC's claim and will provide any further update as required.
