By and -

Key decisions

  • Australian Securities and Investments Commission v Commonwealth Securities Limited [2022] FCA 1253
  • Australian Securities and Investments Commission v Commonwealth Bank of Australia [2022] FCA 1422


Admitted civil contraventions of Market Integrity Rules, Corporations Act 2001 (Cth) and Australian Securities and Investments Commission 2001 Act (Cth) – parties agree on proposed relief.

Australian Securities and Investments Commission v Commonwealth Securities Limited [2022] FCA 1253 (Abraham J)

Between approximately 2010 and 2020, two subsidiaries of Commonwealth Bank of Australia Limited (‘CBA’), Commonwealth Securities Limited (‘CommSec’) and Australian Investment Exchange Limited (‘AUSIEX’), provided financial services to clients, including services that allowed clients to trade securities and maintain online trading accounts.

The Australian Securities and Investments Commission (‘ASIC’) alleged, and CommSec and AUSIEX admitted, that CommSec and AUSIEX contravened:

  • Section 798H of the Corporations Act (obligation to comply with the market integrity rules);
  • Section 12DB of the ASIC Act (prohibition on false or misleading representations), and
  • Section 912A(1)(a) of the Corporations Act (general obligations of Australian Financial Services Licensees).

CommSec and AUSIEX had, for about 10 years, charged incorrect brokerage fees; breached client money requirements and trust account reconciliation rules. They also  failed to:

  • send trade confirmations;
  • had inadequate automated order processing filters;
  • failed to comply with best execution obligations;
  • traded warrants on CommSec accounts without a valid Warrant Agreement Form on record; and
  • failed to adhere to regulatory data requirements.

There was no single cause of all the offending conduct. The issues were found to have arisen from failures such as information technology system coding or systems issues, human error, and/or data entry errors (at [8]).

The relief

ASIC, CommSec and AUSIEX jointly submitted the appropriate relief comprised:

  • compliance program orders;
  • civil penalties of $20 million in respect of CommSec and $7.12 million in respect of AUSIEX (following a 30 per cent discount for co-operation); and
  • declarations of contravention.

The Court accepted the parties’ respective submissions and made the orders.

The Court also ordered CommSec and AUSIEX to pay ASIC’s costs.

As part of the Court’s consideration of the appropriateness of that relief, her Honour Justice Abraham provided helpful explanations of the principles relevant to those forms of relief. They are discussed below.

Compliance program orders

Her Honour identified principles relevant to compliance program orders pursuant to s 1101B of the Corporations Act (at [48]-[50]). In particular, her Honour noted the compliance program must:

  • have a connection with the contravening conduct that has been found (at [49]); and
  • strike the appropriate balance between prescription, so as to avoid uncertainty, and over particularity, so as to avoid unworkability (at [50]).

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