Former Commonwealth Bank subsidiary Avanteos Investments has been convicted and penalised $1.71 million by the County Court of Victoria for failing to update defective disclosure statements.
The defective disclosure, ASIC said in a statement on Wednesday, related to the charging of fees to superannuation members after their death when it was known that Avanteos did not have the lawful authority to do so.
Around 499 deceased members with funds in Avanteos superannuation products were charged nearly $700,000 in fees which Avanteos was not entitled to charge.
This conduct by the firm, which traded as Colonial First State Custom Solutions, was the subject of a referral to ASIC from the Financial Services Royal Commission.
“This is the first criminal prosecution for failing to update defective disclosure statements, and it should be seen as a warning to the industry to act on advice and rectify problems quickly, or face possible criminal action,” commented ASIC deputy chair Sarah Court.
“This matter was particularly serious because senior managers within Avanteos were aware that it did not have the authority to deduct fees from its members after their death. Despite this knowledge, there were no changes made to Avanteos’ disclosure documents and the unlawful fees continued to be charged for over two years.”
Avanteos has remediated all affected customers’ estates and pleaded guilty to the 18 criminal charges in December last year.
Judge Wraight said that the firm’s disclosure failures were the result of a “systemic breakdown” and noted that a penalty of $2.7 million would have been handed down if not for Avanteos’ early guilty plea.
“The offending can only be described as a very serious failure of corporate governance and an example of a financial corporation putting its own interests above those of its investors in breach of the law,” Judge Wraight said.
Jon Bragg
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.
