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ASIC is suing CBA’s (ASX:CBA) CommSec and AUSIEX

It has been announced that ASIC is suing Commonwealth Bank of Australia’s (ASX: CBA) CommSec and Australian Investment Exchange (AUSIEX).

What’s happening to CBA?

The big four bank acknowledged to the market that the Australian Securities and Investments Commission (ASIC) has commenced civil proceedings against CBA’s  subsidiaries, CommSec and AUSIEX.

What’s it about? Well, there were apparently issues relating to regulatory data requirements, trade confirmation requirements (primarily related to exchange traded options), best execution requirements and reconciliations of client monies. In addition, for CommSec only, the proceedings relate to issues about brokerage payments, warrant agreement forms and automated order processing filters.

CBA said that the issues happened because of errors such as IT system coding or systems issues, human error and/or data entry errors. The bank said that the only issue where there was any direct financial loss to some customers was in relation to instances of brokerage overcharging.

What is CBA doing to fix it?

The major bank said that CommSec and AUSIEX have engaged extensively and co-operatively with ASIC. ASIC has acknowledged the co-operation and that CommSec and AUSIEX do not intend to defend the proceedings.

CommSec has paid total remediation of $6.5 million (including interest) comprising refunds and other compensation payments to customers affected by the issues.

Richard Burns, Managing Director of CommSec, said: “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.”

CommSec and AUSIEX have agreed with ASIC to enter into a court ordered compliance program, which will be reviewed by an independent expert. It’s aimed at ensuring all the remedial work undertaken by CommSec and AUSIEX have been adequately completed and ongoing systems and controls are effective.

Summary thoughts

This seems like a much smaller problem than the things that were unearthed in the financial services royal commission, but it shows that the big banks need to be consistently vigilant about what’s going on, or else they’ll suffer more financial penalties. This doesn’t change my opinion of CBA, but I wouldn’t call it a buy right now. Its shares have risen strongly in recent months. However, if interest rates do start rising then that could lead to a higher net interest margin (NIM) and higher profits.

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Afterpay, Zip Co, Sezzle…

Is BNPL the opportunity of a lifetime or is the sector a ticking time bomb?

Rask's analyst has just finished a 7,500-word report, The Ultimate BNPL Sector Report, taking a deep dive into this booming ASX sector. It shines a spotlight on each of the major players. You can get the full analyst report for FREE by CLICKING HERE NOW.

Note: the report is 100% free.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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