ASIC preparing brief for Commonwealth DPP over fees-for-no-service rorts

AUSTRALIAN Securities and Investments Commission says it is ready to launch court action over the $1 billion “fee for no service” scandal.

THE corporate watchdog says it is ready to unleash court action over the $1 billion “fee for no service” scandal that has rocked Australia’s banking industry.

And “there is a very high probability of proceedings commencing in the near future”, the deputy chair of regulator the Australian Securities and Investments Commission, says.

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Speaking at the financial services royal commission on Friday, Peter Kell said ASIC had already considered launching criminal proceedings through the Commonwealth Director of Public Prosecutions. Evidence of various legal breaches by some of Australia’s financial heavyweights has been tabled in royal commission hearings, and could be brought by ASIC before the courts.

Mr Kell said ultimately, the compensation bill for lenders which charged fees for services they did not provide, could top $1 billion.

Compensation paid so far had hit $260 million, Mr Kell said.

Banks had set aside $850 million for potential compensation payments and the tally was rising as investigations continued, he said. The issues go back a decade.

In a sometimes bruising session of the royal commission, Mr Kell sought to defend the regulator’s oversight of the banking sector.

ASIC deputy chair Peter Kell leaves the royal commission on Friday.

Counsel assisting the commission Michael Hodge, QC, asked if ASIC had been robust enough in pursuing misconduct. “So far, no proceedings have been commenced in relation to the fees-for-no-service project?” Mr Hodge asked.

“No, so far that is correct — so far no proceedings have commenced,” Mr Kell said.

“We’ve had enforceable undertakings, bannings and the licence condition.

“I would expect that there is a very high likelihood of proceedings commencing in the near future.”

Asked by commissioner Kenneth Hayne if civil proceedings were the best way to “achieve public denunciation” of misconduct, Mr Kell replied that it “might be that criminal proceedings are in some cases an appropriate tool”.

Mr Hayne asked: “If criminal proceedings were to be launched, that would have to be by the Commonwealth (Director of Public Prosecutions) would it not?”

“That’s correct,” Mr Kell replied.

Senior counsel assisting the royal commission Michael Hodge, QC.

Mr Hayne asked if ASIC had given consideration to submitting a brief to the Commonwealth DPP with regard to any aspect of the fees-for-no-service issue.

Mr Kell said: “Yes.”

Separately on Friday, confidential internal emails from ASIC revealed the regulator was stunned in November 2016 when National Australia Bank belatedly revealed it was increasing its fees-for-no-service compensation pool to $34 million.

Previously, the bank had said it would pay out $16.5 million.

The royal commission had earlier heard NAB delayed providing an update to ASIC, which was planning to release a report on the industry’s fee-for-no-service scandal on October 27 — the same day NAB was releasing its full-year results.

Commissioner Kenneth Hayne is presiding over the hearings.

NAB did not disclose the higher figure earlier because it wanted to sit in “the middle of the pack” of offenders named in ASIC’s report, the commission heard.

After NAB finally updated the regulator, an email was circulated within ASIC saying: “The revised figure is concerning because the company has known about the event for approximately 11 months and has only just presented the figures in a meeting today.”

The bank had not provided a formal letter, and instead “just a hard copy PowerPoint presentation”, the email said.

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