NAB disputes commission allegations

NAB expects to be held accountable for any criminal offences, but disagrees with some allegations raised in the royal commission.

Senior Counsel Assisting Michael Hodge at the royal commission.

National Australia Bank says it expects to be “held accountable” if it is found to have committed any criminal offences, but disagrees with some allegations raised in the financial services royal commission.

The banking major was slammed for a string of cultural and behavioural shortcomings in superannuation after counsel assisting the royal commission, Michael Hodge QC, alleged NAB broke criminal laws in relation to charging tens of millions of dollars in fees but providing no service, and failing to put customers first in overseeing super funds.

The allegations, raised on Friday night, have put senior NAB executives — CEO Andrew Thorburn and head of wealth Andrew Hagger — under intense pressure amid claims the bank broke super laws on their watch.

NAB has also been singled out for failing to appreciate the gravity of the fees-for-no-service scandal.

According to Mr Hodge’s closing submission, Mr Thorburn and Mr Hagger were involved in an email exchange over how to minimise reputational impact and compensation in the fee scandal.

The allegations could upset the timing of the planned sale or stockmarket spin-off of NAB’s wealth arm, which ranks as the nation’s biggest retail super fund with funds under management of $78 billion. NAB’s culture was criticised over behaviour that indicated “a disregard on the part of the NAB Group for members of the relevant superannuation funds, for regulators and for the law”.

The bank continued to demonstrate “a lack of insight” about charging customers fees for no services as well as “an unwillingness to acknowledge problems” of the funds that continued to do this, Mr Hodge said.

“Even now, NAB has not agreed to test whether four of its five licensees have provided the services that it had contracted to provide in exchange for the fees it had charged its customers. It cannot be satisfied that the group has a legitimate basis for retaining all of those fees,” Mr Hodge said.

“No witness from NAB demonstrated insight into why this situation is unacceptable.”

NAB said the bank acknowledged the findings that counsel assisting the royal commission had submitted were open.

“There are proposed findings that we disagree with and we will address them when we respond to the closing submissions by August 31. We take our obligations to uphold the law seriously. Where we get it wrong, we expect to be held accountable,” a NAB spokeswoman said.

Mr Hodge alleged NAB committed a criminal breach of superannuation laws because the bank’s super trustee company, NULIS, failed to ensure the funds it controlled were run solely for the benefit of members.

He also claimed NAB committed crimes by failing to report serious financial service licence breaches to ASIC within 10 days and civil breaches by engaging in misleading and deceptive conduct.

Mr Hagger’s dealings with the Australian Securities & Investments Commission have also come under scrutiny.

“NAB was not full and frank with the regulator in respect of the quantum of loss to members or the amount of expected remediation,” Mr Hodge said.

“Mr Hagger’s evidence that he ‘left the door open’ for ASIC to ask the question reveals both a disrespect for the role of the regulator and a disregard for the gravity of the events in question,” Mr Hodge said.

In Commonwealth Bank’s case, Mr Hodge said it was open to the royal commission to find that the bank “was right to acknowledge” to APRA that it had committed 13,000 criminal offences by failing to transfer members from a high-fee fund to a low-fee MySuper fund by a deadline of January 1, 2014.

The failure resulted in further breaches of civil provisions of superannuation and corporate laws, he said.

A spokesman for Commonwealth Bank declined to comment before the royal commission has reviewed and published the bank’s response.

Separately, Mr Hodge recommended a ban on all commissions payable from superannuation products and end to grandfathering of fees paid on such products. He also called for an end to ongoing service fees being deducted by trustees from superannuation accounts.

Platinum Asset Management founder Kerr Neilson said the royal commission “has been a stunning revelation to many”.

In a note to investors, Mr Neilson said the looming hiving off by ANZ, CBA and NAB of their wealth management and financial advisory divisions wouldn’t necessarily fix the problem for customers.

“Coming under new ownership but continuing with similar practices of conflicted advice and pushing in-house products is unlikely to broaden or enhance the choice for investors,” Mr Neilson said.