CFS to pay $20m penalty for misleading super members

The Federal Court has ordered Colonial First State Investments Limited (CFSIL), as trustee for the Colonial First State FirstChoice Superannuation Trust (FirstChoice Fund), to pay a penalty of $20 million for misleading communications with members. 

The court previously declared CFS had breached the Australian Securities and Investments Commissions (ASIC) Act and Corporations Act when communicating to members on at least 12,978 occasions.

According to the regulator, the misleading or deceptive conduct by CFS included:

• Telling its members that legislative changes required Colonial to contact them and obtain an investment direction to stay in the FirstChoice Fund when that was not the case; and
• Failing to tell members that if Colonial did not receive an investment direction from the member, it was required to transfer the member's superannuation contributions into a MySuper product.

ASIC deputy chair Sarah Court said: “The $20 million penalty handed down to Colonial is a timely reminder to superannuation trustees not to mislead members for their own benefit. Trustees have an obligation to provide their members with balanced and accurate information that enables them to make informed decisions about their retirement savings.

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“Superannuation represents the future financial security of all Australians. We want to see funds operate in a way that is fair for members and promotes confidence in superannuation.”

According to ASIC, in his decision, Justice Murphy found that Colonial’s conduct “involved false or misleading representations made to approximately 13,000 members of the fund, in a concerted campaign which went on for more than two years” and that “its contravening conduct involved, in effect, seeking to take advantage of members whose interests it was, as trustee of the fund, duty-bound to protect.”

Colonial was also ordered to publish an Adverse Publicity Order and to pay ASIC’s costs.