ASIC has scored a major legal win after the Federal Court ordered two NAB-owned subsidiaries to pay record civil fines worth A$57.5 million for misleading conduct relating to the Fee For No Service scandal.
Justice David Yates imposed the big fine on NAB’s trustee companies – NULIS Nominees and MLC Nominees – in a decision handed down in Sydney on Monday.
The judge found that that the trustee businesses had committed “very serious” breaches of the Corporations Act by not notifying customers that they could turn off plan service fees after they transferred to personal superannuation products that did not require financial advice.
The breaches occurred over a six year period from September 2012 and resulted in $105 million of fees being deducted from the at least 457,000 customers who either did not have a financial adviser or shifted to an advice-free super product.
Most of the contraventions were committed by MLC Nominees, which accounted for $49.5 million of the total penalties. NULIS Nominees copped an $8 million fine.
In submissions to the court, NULIS and MLC Nominees argued for the fines to be limited to $2 million and $8 million respectively on the grounds that the breaches did not stem from deliberate conduct and that both companies had cooperated with ASIC investigations.
Justice Yates rejected the submissions in part, noting the magnitude of the breaching in the case of MLC Nominees’, which it continued to levy advice fees on thousands of customers who migrated to the Master Key Personal Superannuation product.
“…the penalty for which MLC Nominees contends ($8 million) does not recognise the seriousness of its contraventions or the extent to which the representations were made,” Justice Yates found in his judgment.
“Further, it would not achieve the objectives of deterrence.”
ASIC deputy chair Daniel Crennan QC said the fines imposed on MLC Nominees and NULIS were the largest in a civil action mounted by the conduct regulator.
“As the court observed, civil penalties must be sufficiently high to deter repetition by the contravener and others who might be tempted to contravene,” he said.
“Achieving specific and general deterrence by pursuing civil penalties through the courts is a key focus of the Office of Enforcement.
“Fees for no service conduct is particularly egregious, having resulted in substantial financial loss for thousands of unsuspecting consumers.
“ASIC will continue to bring enforcement action against this misconduct and other case studies from the Financial Services Royal Commission.”
The NAB group faces further legal action over Fee For No Service breaches, after ASIC last December filed a separate case in the Federal Court against NAB Limited.
While most of the allegations made by ASIC in the NAB Limited case resemble those brought against the subsidiaries, they also include an unconscionable conduct claim.
“It is also ASIC’s case that NAB engaged in unconscionable conduct from at least May 2018 by continuing to charge ongoing service fees to certain customers when it knew that it had not delivered the services and had issued defective Fee Disclosure Statements or at least knew that there was a real risk that it had