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18-259MR Fees for no service: ASIC commences Federal Court action against NAB companies
ASIC has today commenced proceedings in the Federal Court of Australia against two entities in NAB’s wealth management division, NULIS Nominees (Australia) Limited (NULIS) and MLC Nominees Pty Ltd (MLC Nominees). The court proceedings relate to fees charged by both entities to a significant number of their superannuation members for services not provided.
ASIC alleges that NULIS and MLC Nominees (as the current and former superannuation trustee of NAB) misled members of MLC MasterKey Super products.
ASIC also alleges NULIS and MLC Nominees deducted approximately $33m Plan Service Fees from 220,000 members of MLC MasterKey Business and MLC MasterKey Personal Super who did not have Plan Adviser (No-Adviser Members). NAB also deducted approximately $67m Plan Service Fees from 300,000 members of MLC MasterKey Personal Super where Plan Advisers were not required to provide services and members did not receive services (or any services they could not otherwise obtain for free).
ASIC seeks from the Federal Court declarations of contravention and a civil penalty.
The commencement of this civil penalty action is part of ASIC’s broad-ranging and significant investigations currently underway into fee for no service failures in the financial services industry. Alongside these investigations ASIC is obtaining considerable remediation for impacted customers, currently estimated to exceed $850m.
ASIC alleges that MLC Nominees and NULIS:
- contravened s912A(1)(a) of the Corporations Act 2001 (Corporations Act) by failing to ensure that its financial services were provided efficiently, honestly and fairly when it deducted approximately $33m Plan Service Fees from 220,000 No-Adviser Members;
- made false or misleading representations to No-Adviser Members in contravention of ss 12DB, 12DA of the Australian Securities and Investments Commission Act 2001 (ASIC Act) and s1041H of the Corporations Act by representing that it was entitled to deduct the Plan Service Fee and the No-Adviser Member was obliged to pay it when there was no such obligation;
- contravened s912A(1)(a) of the Corporations Act when deducting approximately $67.1m Plan Service Fees from 300,000 members of MLC MasterKey Personal Super (Linked Members) in circumstances where it did not oblige Plan Advisers to provide services and members did not receive services;
- made false or misleading representations in contravention of s12DB and s12DA of the ASIC Act by not disclosing that Linked Members in MLC Masterkey Personal Super had the right to turn off the Plan Service Fee; and
- contravened s912A(1)(c) of the Corporations Act by failing to comply with financial services laws, including issuing defective disclosure documents within the meaning of s1022A of the Corporations Act and failing to exercise the degree of skill, care and diligence as a prudent trustee would exercise and failing to act in the best interests of members in breach of its general law duties and the Superannuation Industry (Supervision) Act 1993 when making the fee deductions and alleged misrepresentations to members.
Between October 2016 and June 2017, NULIS remediated No-Adviser Members approximately $35.9m (including interest and less fund tax of $6m).
NULIS also announced on 26 July 2018 that it would refund Linked Members with the total remediation expected to be approximately $87.1m (including interest and less fund tax of $15m).
ASIC also imposed, by consent, additional licence obligations on NULIS in January 2017 following its inquires in relation to several breach reports, including the Plan Services Fee.
ASIC has ongoing investigation in relation to Adviser Service Fees charged by NAB entities in relation to personal advice services.
On 8 October 2018, the Court made orders setting a timetable to advance the proceedings including for the filing of the Defendants’ Concise Statement and a Statement of Agreed Facts and Issues in Dispute.
The matter is listed for a further Case Management Hearing in the Federal Court at 9.30am on 17 December 2018.
Editor's note 2:
On 17 December 2018, the Court made orders setting a further timetable to advance the proceedings including for the filing of the parties’ evidence and for the parties to engage in mediation.
The matter is listed for a further Case Management Hearing in the Federal Court at 9.30am on 3 May 2019.
Editor's note 3:
A further case management hearing has been listed for 31 May 2019.
Editor's note 4:
The case management hearing listed for 31 May 2019 has now been stood over until 9.15 am on 29 July 2019.
Editor's note 5:
The matter has been listed for further case management hearing on 10 September 2019 in the Federal Court, Sydney.
Editor's note 6:
The hearing date for case management scheduled for 10 September 2019 has been vacated and re-listed to 19 September 2019.
Editor's note 7:
At a case management conference on 19 September 2019, Justice Yates listed the matter for a final hearing on 16 March 2020.
Editor's note 8:
A Statement of Agreed Facts and Admissions, jointly made by ASIC, MLC Nominees and NULIS, has been filed in the Federal Court.
The statement sets out facts which the parties have agreed are not, for the purposes of the proceeding, to be disputed. The statement is made in relation to proposed orders to be sought by ASIC which have been agreed between the parties.
Provision has been made for the parties to file any further evidence with the Court and for submissions on liability and penalty. A hearing will take place in the Federal Court on 16 March 2020.
Editor's note 9:
The hearing held on 16 March 2020 was adjourned to 31 March 2020.
Editor's note 10:
On 31 March 2020 the hearing was vacated and the matter was listed for a case management hearing on 20 April 2020.
Editor's note 11:
The matter has been listed for a resumed hearing on 19 June 2020.