The Commonwealth Bank faced up to $8 million in fines over misleading ads for insurance but walked away with a $300,000 "punishment" with the regulator's blessing.
The Australian Securities and Investments Commission did not follow through on its warning that it may take enforcement action over the misleading advertising that broke the law.
CBA's insurance business CommInsure in December agreed to the $300,000 community benefit payment over what ASIC described as misleading and deceptive statement in ads from mid-2013 to March 2016.
At the time CommInsure did not acknowledge it did anything wrong.
It was only in the banking royal commission on Thursday that CBA and CommInsure formally acknowledged their four website ads, about trauma coverage for heart attacks, were misleading.
People reading the ads could be left thinking they would be covered for a heart attack when that was not necessarily the case.
ASIC and CommInsure came to an agreement to close the advertising issue, with email exchanges showing the regulator asked the company if its proposal was sufficient to resolve the matter.
Royal commissioner Kenneth Hayne QC said it was the regulator asking the regulated if the proposal was sufficient in the eyes of the party alleged to have broken the law.
CommInsure executive general manager Helen Troup said it was two organisations resolving the matter satisfactorily for both companies.
She said the insurer could have taken an approach of continuing to defend its position.
Mr Hayne said the $300,000 payment was a very small amount when CommInsure could have faced a maximum punishment of $8 million.
Ms Troup said CommInsure did come out of the process thinking it had been punished.
"I think we feel the $300,000 community benefit payment was a form of punishment."
The advertising issue was connected to ASIC's investigation into the 2016 scandal over CommInsure using out-of-date medical definitions.
The royal commission heard ASIC gave CommInsure advance notice of its 2017 findings and also discussed with it what went into its media release.
ASIC found CommInsure had not broken the law but said improvements needed to be made, also clearing it of allegations its managers had pressured doctors to alter medical opinions so it could deny insurance claims.
CommInsure admitted to the royal commission that it misled the Financial Ombudsman Service about a case centred on the definition of a heart attack.
FOS told ASIC it believed CommInsure had engaged in serious misconduct by misleading it, but the inquiry heard ASIC took no action other than to tell the insurer not to do it again.
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