The Commonwealth Bank of Australia Ltd (ASX: CBA) share price edged marginally higher on Friday afternoon despite the bank's life insurance arm being slapped with criminal charges by the Federal prosecutor.
What happened to Commonwealth Bank on Friday?
The Commonwealth Director of Public Prosecutions (CDPP) served The Colonial Mutual Life Assurance Society (CMLA), part of the bank's CommInsure life insurance arm, in relation to criminal proceedings.
The CDPP is pursuing CommInsure for 87 alleged contraventions of anti-hawking provisions of the Corporations Act between 7 October 2014 and 16 December 2014.
Anti-hawking provisions are those sections of the Corporations Act designed to prevent "hawking" which prohibits insurers from selling unsolicited products to retail clients.
It is understood that charges are in relation to unsolicited phone calls made to try and push CommInsure's insurance products during this period in 2014.
This is pretty big news as it represents the first real charges laid by the CDPP in relation to revelations from the Kenneth Hayne-led 2018 Financial Services Royal Commission.
What does this all mean for Commonwealth Bank?
While it's certainly not good news for the company, Commonwealth Bank on Friday released a statement acknowledging the charges but has declined to comment further on the matter.
I'd expect to see the Commonwealth Bank share price move around on Monday as shareholders evaluate just how much of an impact these charges could have on the bank.
The bank did come under intense scrutiny during the Royal Commission for some of CommInsure's practices and we could see other bank share prices fall lower on fears of further prosecutions.
Should you buy CBA shares?
The Commonwealth Bank share price has struggled to deliver capital gains in 2019, particularly in the broader context of low interest rates and the finalisation of the Royal Commission.
The CBA share price is up 9.33% so far in 2019 but trails its fellow 'Big Four' peers and the S&P/ASX 200 Index (INDEXASX: XJO) for capital gains – albeit it is the only Big Four bank to have reported its full-year results so far.
Given this latest cloud hanging over the bank, I personally wouldn't be buying just yet and would instead be looking at Magellan Financial Group Ltd (ASX: MFG) as an alternative in the Financials sector.
