On 19 October 2021, the Federal Court issued a Penalty against CFSIL, as trustee for the Colonial First State FirstChoice Superannuation Trust, for breaches of the Corporations Act when it was found to have provided misleading and deceptive communication to its members. The illegal conduct included:
- informing members that Colonial must contact them to seek a direction to remain in the FirstChoice Fund, when no such requirement had been needed; and
- failing to inform members that if Colonial did not receive an investment direction from a member, it was required to transfer the member into a MySuper product.
The Court found that the approach by the Trustee was a deliberate and intentional strategy to mislead and retain members in the FirstChoice product rather than move them to a MySuper product.
In his decision Justice Murphy found that the conduct “involved making false or misleading representations 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 legal costs.
The Judge acknowledged Colonial’s remediation program, currently amounting to $67 million, without which, the Judge said, the penalty would have been significantly higher. In determining a fine of $20 million the Judge stated:
“..this is just and appropriate, for the totality of the contravening conduct having regard to the seriousness of the contraventions, including the number of breaches, and the period over which they occurred, that the conduct involved senior management, that Colonial was acting as a trustee when it committed the breaches, that the conduct caused substantial losses, and the need for specific and general deterrence, and taking into account the substantial remediation program.”