The Federal Court has penalised popular share trading platform CommSec $20 million for overcharging and misleading customers.
The court also fined Ausiex, formerly known as CommSec Adviser Services, another $7.12 million for various breaches of the market integrity rules and corporations act.
The CommSec failures included overcharging brokerage fees by a total of more than $4.3 million over 120,933 transactions. The platform had breached the ASIC act for "systemic compliance failures".
According to the Australian Securities and Investments Commission, the penalty is the largest ever handed down for market integrity rule breaches.
ASIC deputy chair Sarah Court announced that both entities "demonstrated widespread, systemic compliance failures over a nine-year period".
"CommSec's failures also resulted in millions of dollars being overcharged to customers," she said.
"When market participants fail to comply with the market integrity rules, they undermine the integrity of Australia's financial markets."
Failed to provide services 'efficiently, honestly and fairly'
At the time of the offences, both CommSec and Ausiex were fully owned by Commonwealth Bank of Australia (ASX: CBA). The bank sold Ausiex to Nomura Research Institute in 2020.
The Commonwealth Bank acknowledged the court's decision and noted it did not defend the accusations.
"We apologise to our customers who were impacted by our mistakes," said CommSec executive general manager Richard Burns.
"These errors never should have happened. CommSec has paid total remediation of $6.5 million (including interest) to customers affected by the issues and this program is now complete."
As well as the brokerage fee overcharges, the court found:
- CommSec and Ausiex failed to comply with client money reconciliation requirements
- Both platforms didn't provide accurate confirmations to customers for certain transactions
- CommSec didn't have system filters to detect wash trading
- Both platforms failed to comply with best execution policies and procedures
- CommSec failed to enter into the required warrant agreement forms with clients and provide an explanatory booklet before the client's first warrant purchase
- Both platforms failed to include the required intermediary identification in regulatory data submitted to relevant market operators
Overall, the judgement found that both entities failed to "do all things necessary to ensure its financial services were provided efficiently, honestly and fairly".
According to Justice Wendy Abraham, "the number, breadth and duration of the reported conduct is significant".
"CommSec and AUSIEX did not have adequate systems and processes in place to ensure compliance," she said.
"The conduct is properly characterised as being extensive and systematic, occurring over an extended period of time, which affected multiple aspects of the businesses of both CommSec and Ausiex."
Burns said CommSec has "strengthened our systems and procedures to address these errors".
"We will implement a compliance programme as agreed with ASIC and required by the court which will be monitored by an independent expert and we fully support this process."
The stock trading platform had previously been fined a total of more than $1 million for multiple contraventions of the market integrity rules.
