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CBA (ASX:CBA) share price on watch after being hit with civil proceedings by ASIC

Commonwealth Bank place Sydney NSW
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The Commonwealth Bank of Australia (ASX: CBA) share price will be on watch on Tuesday.

This follows the release of an announcement after the market close on Monday.

What did CBA announce?

This afternoon Australia’s largest bank announced that the Australian Securities and Investments Commission (ASIC) has commenced civil proceedings in the Federal Court against Commonwealth Securities Limited (CommSec) and Australian Investment Exchange Limited (AUSIEX). Both businesses are subsidiaries of CBA.

According to the release, the proceedings relate to errors that were reported to ASIC by CommSec and AUSIEX.

CommSec and AUSIEX have engaged extensively and co-operatively with ASIC. The bank notes that the regulator has also filed with the Federal Court and published on its website a Statement of Agreed Facts and Contraventions. This recognises their co-operation and that CommSec and AUSIEX do not intend to defend the proceedings.

What are the proceedings?

The proceedings relate to issues in respect of regulatory data requirements, trade confirmation requirements, best execution requirements, and reconciliations of client monies.

In addition to this, for the CommSec business only, the proceedings relate to issues in respect to brokerage payments, warrant agreement forms, and automated order processing filters.

Commonwealth Bank advised that the issues arose from errors such as information technology system coding or systems issues, human error, and/or data entry errors. The only issue where there was any direct financial loss to some customers was in relation to instances of brokerage overcharging.

In response to this, CommSec has paid total remediation of $6.5 million (including interest). This comprises refunds and other compensation payments to customers affected by the issues.

CommSec’s Managing Director, Richard Burns, commented: “We apologise to our customers who were impacted by our mistakes. These errors never should have happened. We acknowledge the importance of meeting our compliance obligations and we are committed to continuing to invest in strengthening our systems and procedures.”

What now?

CommSec and AUSIEX have agreed with ASIC to enter into a court ordered compliance program.

This compliance program will include a review by an independent expert, and is aimed at ensuring that all the remedial work has been adequately completed and ongoing systems and controls are effective.

On Monday, the CBA share price was in fine form. It rose 3.1% to $84.11. This leaves the bank’s shares trading within sight of their 52-week high.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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