ASIC FFNS enforcement action 

6 mins  09.09.2018

ASIC announcement of enforcement action against two NAB entities: Nulis Nominees (Australia) Ltd and MLC Nominees Pty Ltd.

On 6 September, ASIC announced that it had 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 number of their superannuation members for services, which were (allegedly) not provided.

ASIC Allegations against MLC Nominees

  • Breach of trust:  ASIC alleges that the deduction of certain fees from members who were not linked to an adviser was a breach of trust by MLC nominees.
  • Failure to provide services efficiently, honestly and fairly: ASIC alleges that by deducting fees for advice from member accounts when the account was not linked to an adviser, by not 'forming a reasonable belief or having in place a system to enable it to form a reasonable belief' about whether advice was being provided in exchange for the fee, by not disclosing to members that the fee could be turned off, as well as by issuing product disclosure statements which were 'defective within the meaning of s1022A of the Corporations Act' that MLC Nominees 'failed to all things necessary to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly in breach of s 912A(1)(a) of the Corporations Act 2001 (Cth)'.  
  • Failure to comply with financial services law: ASIC alleges that MLC Nominees failed to comply with the financial services law in a number of respects, in breach of s912A(1)(c ) of the Corporations Act 2001 (Cth).  In addition ASIC alleges that MLC Nominees failed to exercise proper care, skill and diligence and failed to act in the best interests of members in breach of 'general law duties and covenants incorporated into the Trust Deed and required under ss52(2)(b) and 522(c) of the Superannuation Industry (Superannuation) Act 1993 (SIS Act) and s55(1) of the SIS Act.
  • Misleading, deceptive and false conduct: ASIC alleges that MLC Nominees engaged in misleading or deceptive conduct within the meaning of s12DA(1) of the ASIC Act and s1041H(1) of the Corporations Act and made representations that were false or misleading within the meaning of s12DB(1)(g) and (i) of the ASIC Act.

ASIC Allegations against NULIS

  • Failure to provide financial services efficiently, honestly and fairly: ASIC writes that the 'case against NULIS is the same as that against MLC Nominees, except NULIS did not issue the defective PDSs and its misleading, deceptive and false conduct was more confined'.  ASIC alleges that NULIS failed to do all things necessary upon becoming trustee, to 'form a reasonable belief' that service was being provided in exchange for fees being paid, and to terminate fees where no service was provided.  This, ASIC alleges was a failure by NULIS to ensure that the financial services covered by its licence were provided efficiently, honestly and fairly in breach of s912A(1)(a) of the Corporations Act. 
  • Failure to comply with the financial services law:  ASIC alleges that NULIS breached s912A(1)(c ) by failing to exercise proper care and skill and failed to act in the best interests of members in breach 'not only of NULIS' general law duties and covenants included pursuant to …the trust deed for the MLC Super Fund but also of s55(1) of the SIS Act'.
  • Misleading or deceptive conduct: ASIC alleges that NULIS engaged in misleading or deceptive conduct within the meaning of s12DA(1) of the ASIC Act and s104H(1) of the Corporations Act.  ASIC also alleges that NULIS made false or misleading representations within the meaning of s12DB(1)(g) and 12DB(1)(i) of the ASIC Act.

[Note: Certain of the alleged contraventions identified by ASIC appear similar to those identified by Counsel Assisting in closing submissions to the Financial Services Royal Commission Round 5 hearings into superannuation.  See: Superannuation Closing Submissions at B2; for a high level summary of closing submissions: Governance News 27/08/2018]

ASIC is seeking declarations of contravention, pecuniary penalties and costs:

  • declarations of contravention of ss912(1)(a), 912A(1)(c ) and 1041H(1) of the Corporations Act; ss12DA(1), 12DB(1)(g) and 12DB(1(i) of the ASIC Act and general law duties; and 
  • pecuniary penalties pursuant to s12GBA of the ASIC Act in respect of each declared civil penalty contravention; and 
  • costs.

ASIC investigation in relation to adviser service fees charged by NAB is ongoing

The ASIC media release also outlines the actions already taken relation to this issue and states that ASIC 'has ongoing investigation in relation to Adviser Service Fees charged by NAB entities in relation to personal advice services'. 

Other investigations underway

 ASIC states that the action against the NAB entities is part of a number of ‘broad-ranging and significant investigations currently underway into fee for no service failures in the financial services industry’. ASIC adds that alongside these investigations ASIC is obtaining considerable remediation for impacted customers, currently estimated to exceed $850m.

[Sources: ASIC media release 06/09/2018; Concise statement – ASIC v NULIS Nominees; Originating Process

Queries? If you have queries or feedback regarding this article, please contact Kate Hilder.

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https://www.minterellison.com/articles/asic-announcement-ffns-enforcement-action-against-nab-entities-nulis-and-mlc

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