1.2 Evidence

1.2.1Fees for no service

As my Interim Report records, ASIC started its ‘Wealth Management Project’ in 2014.[1] This was a major project focusing upon the financial advice businesses conducted by ANZ, CBA, NAB, Macquarie, Westpac and AMP. And, as also recorded in the Interim Report, ASIC announced in April 2015 that it was ‘investigating multiple instances of licensees charging clients for financial advice, including annual advice reviews, where the advice was not provided’.[2] In August 2018, the then Deputy Chair of ASIC told the Commission that about $260 million had already been paid in compensation for the charging of fees for no service, that the total amount of estimated compensation (including what had already been paid) was about $850 million and that he ‘wouldn’t be at all surprised if it ends up being in excess of a billion dollars’.[3]

The Commission’s inquiries about NAB’s superannuation business and fees for no service examined four matters:

  • The charging of ‘Plan Service Fees’ (PSFs) to members of funds of which MLC Nominees and, later, NULIS was trustee;
  • NAB’s dealings with ASIC about those matters, in particular in connection with ASIC’s publication, in October 2016, of its Report 499: Financial Advice: Fees for No Service;
  • The charging of ‘Adviser Service Fees’ (ASFs) to members of funds of which MLC Nominees and, later, NULIS was trustee; and
  • NAB’s reporting to ASIC of breaches, or likely breaches, of its obligations under section 912A of the Corporations Act 2001 (Cth) (the Corporations Act).

Plan service fees

Until July 2016, MLC Nominees was the trustee of The Universal Superannuation Scheme (TUSS) fund. Masterkey Business Super (MKBS) and Masterkey Personal Super (MKPS) were divisions of TUSS.[4] MKBS was described as ‘the corporate employer division’ and MKPS as ‘the personal division to which a member is automatically transferred after ceasing employment with the relevant employer sponsor’.[5] MLC Nominees invested the TUSS assets in investment-linked life insurance policies issued by MLC Limited.

From 2012, members invested in MKBS and MKPS were charged a PSF. The PSF was introduced as part of a wider project by MLC Nominees and MLC Limited (called ‘Superannuation with Fee Transparency’ or ‘SWiFT’) to change the structure of fees and charges and, in particular, to replace the then existing assetbased commission and employer service fee with a single fee.[6]

The PSF was also subsequently applied to members from other funds or products who were ‘traded-up’ to the MKBS and MKPS products. The first relevant trade-up, known as ‘Encompass’, took place in December 2012 and involved the intra-fund transfer of members from other products issued by MLC Nominees to MKBS and MKPS.[7] The second relevant trade-up took place in May 2013 and was also an intra-fund transfer, this time of members in The Employee Retirement Plan (TERP) to the MKBS and MKPS products.[8]

As has been noted, before the PSF was introduced in 2012, members paid an asset-based commission and a fee for general advice services called the ‘Employer Service Fee’.[9] The asset-based commission was paid to an adviser for arranging the commencement of an MKBS plan and for providing members in MKBS and MKPS access to ‘ongoing general support services’.[10] The Employer Service Fee was deducted from member accounts of the MKBS where the employer and the adviser had agreed that the fee would be charged.[11] The Employer Service Fee and asset-based commission were deducted by MLC Limited from members’ accounts and paid to the relevant advisers. If there was an adviser linked to the member’s account then MLC Limited paid the asset-based commission and Employer Service Fee to the linked adviser. Documents produced in evidence suggest that it is possible that the latter fee was deducted even where there was no linked adviser, and was retained by either MLC Nominees[12] or MLC Limited,[13] I cannot say which.

The PSF introduced by MLC Nominees was about equal to the total of the amounts that had been charged as asset-based commission and Employer Service Fee. MLC Nominees deducted the PSF from members’ accounts.[14]

On 1 July 2016, the members of TUSS were transferred, by successor fund transfer (SFT) under the SIS Act, to the MLC Super Fund. NULIS was the trustee of that fund. As a consequence of the transaction, NULIS became the trustee responsible for MKBS and MKPS,[15] MLC Limited ceased to be administrator, and National Wealth Management Services Ltd (NWMSL) became administrator in its place.[16]

ASIC proceedings

On 6 September 2018, after the Commission’s hearings into superannuation had concluded, ASIC commenced proceedings against MLC Nominees and NULIS in the Federal Court of Australia.[17] The proceedings sought a pecuniary penalty under section 12GBA of the Australian Securities and Investments Commission Act 2001 (Cth) (the ASIC Act) and various declarations in relation to the charging of PSFs and related conduct. The documents filed by ASIC alleged that: [18]

  • Contrary to the terms of MKBS and MKPS, the trustees had deducted (or authorised the deduction of) PSFs totalling approximately $33.8 million from the accounts of approximately 220,000 members who were not ‘linked’ to a plan adviser (no-adviser members).
  • Documents issued to no-adviser members represented that the trustee was entitled to deduct the PSF and that members were obliged to pay it.
  • The trustees had deducted (and NULIS continued to deduct) PSFs exceeding $67 million from the accounts of approximately 305,000 members who were linked to a plan adviser.
  • For members who had a plan adviser linked to their account, the trustees were subject to a Licence Remuneration Agreement with each plan adviser’s licensee, which did not oblige the adviser to provide any services, but which obliged the trustee to pay the PSF unless the trustee reasonably believed the adviser was no longer providing the services to which it related.
  • For linked members, the trustees did not know what services, if any, plan advisers had agreed to provide. They had no system to enable them to know whether advisers were no longer providing the services to which the PSF related and were not aware of any services being provided to linked members in the MKPS division.
  • Upon linked members ceasing employment with the employer, they were transferred to the MKPS division and no longer received the services to which the PSF related.
  • The trustees did not exercise their right to terminate the PSF for linked members upon that member ceasing employment and being transferred to the MKPS division.
  • Documents issued to members, including product disclosure statements, did not inform members that linked members in MKPS had the right to elect to turn off the PSF by notifying the trustee.
  • The trustees’ documents included statements that positively misrepresented the rights of linked members in MKPS with respect to the PSF.
  • The conduct and the representations gave rise to contraventions of law including section 912A(1)(a), 912A(1)(c) and 1041H(1) of the Corporations Act, sections 12DA(1), 12DB(1)(g) and 12DB(1)(i) of the ASIC Act, sections 29E(1)(a), 52(2)(b), 52(2)(c) and 55 of the SIS Act, and certain general law duties of the trustees.

The Commission’s Terms of Reference provide that I am not required to inquire, or continue to inquire, into a particular matter to the extent that I am satisfied that the matter is being, or will be, sufficiently and appropriately dealt with by a civil proceeding. I am, of course, satisfied that the matters relating to the charging of PSFs to members, and what the trustees represented to members about the PSFs that are raised in the proceedings, will be sufficiently and appropriately dealt with in those proceedings. I make no findings about the particular contraventions alleged in those proceedings. Whether other forms of proceeding could or should be instituted in respect of these matters in the first instance is a matter for ASIC and I say no more about it.

It remains important, however, to deal here with two matters in respect of the PSFs: first, NAB’s internal investigations into the issues with the PSFs and, second, NAB’s dealings with ASIC about the PSFs around October 2016, when ASIC published its Fees for No Service report.

Internal investigations

In around August 2015, representatives of MLC Limited and MLC Nominees raised queries internally, including with those in the risk team, in relation to the introduction of PSFs.[19] This led to an event being raised in NAB’s risk ‘event management system’ on 4 September 2015, and investigations into what had happened.[20] The event and investigations focused on the charging of PSFs to members who had been part of the TERP trade-up.

The investigations appear to have been conducted by persons working within NAB Wealth and were preceded by investigations relating to ASFs. As part of the investigations, legal advice was received by NAB Wealth that expressed the view that PSFs should be refunded if there was no adviser linked to the member’s account.[21] As NAB had waived legal professional privilege over this advice, a copy was made available to the Commission. The advice noted that employer service fees and ASFs that may have been deducted where there was no adviser linked to the account should also be refunded.[22] A paper presented in October 2015 to the Breach Review Committee (BRC) in respect of the TERP trade-up event expressed the view that the BRC may consider it prudent to notify APRA and ASIC of the event given the large number of members affected. This was said to be 46,875, with the total PSF deducted from the members since the trade-up said to be approximately $4 million.[23] The paper noted that PSFs were still being charged to members who did not have an adviser linked to their account.[24] On 3 December 2015, the boards of NULIS and MLC Nominees were told that a potential issue had arisen in relation to the PSFs. It was not clear from the evidence why the issues were not communicated to the boards until then.

On 24 December 2015, MLC Nominees (as trustee of TUSS) and MLC Limited (then the administrator of TUSS) lodged a breach notification with ASIC about the issue.[25] The notice said that when implementing the trade-up, MLC Limited established systems to apply the PSF to the accounts of transferring members including non-advised members and, as a result, the PSF was deducted from those members’ accounts and retained by MLC Limited.[26] On the same day the breach notification was lodged with ASIC, MLC Nominees lodged a similar breach notification with APRA in relation to that event.[27]

Ms Smith told the Commission that a further investigation was then conducted from around early 2016 to September 2016 in relation to PSFs introduced for members who were part of Project SWiFT and the Encompass trade-up.[28] An event was raised internally on 11 July 2016[29] and further breach notifications were lodged by MLC Nominees and MLC Limited with ASIC on 14 September 2016.[30]

The investigations in relation to the PSFs were conducted by persons working within NAB Wealth. They considered whether it could be said that general advice services provided to members, such as telephone assistance, could justify retaining the PSFs that had been charged to unadvised members.[31] Ms Smith told the Commission that she was aware at ‘a very high level’ of this[32] and that she understood at the time that there were two pieces of legal advice that had differing views.[33] This further advice, which appears to have been external to NAB, was not before the Commission. NAB, as it was entitled to do, did not produce to the Commission either the instructions to the external lawyers or the advice itself. At least initially, however, those within NAB Wealth having the carriage of the matter appear to have proceeded on the basis that it may not have been necessary to refund all PSFs charged to members without a linked adviser.

Although Mr Carter did not accept this characterisation of events, what was done at this time was consistent with senior employees in NAB Wealth trying to find a way to retain the revenue derived from PSFs paid by unadvised members.[34] Be this as it may, NAB Wealth concluded that the services provided by the administrator did not provide a basis to retain the fee as the services the administrator offered were services generally available to all members and members paid for those services by the administration fee.[35]

Communications with ASIC in relation to Report 499

After the breach notifications were made in respect of the TERP and other PSF events, representatives of NAB Wealth and NULIS had several meetings and discussions with ASIC. In respect of the TERP event, NAB Wealth and NULIS gave ASIC regular updates of the estimated total of PSFs charged and number of members affected, as well as the manner in which NAB might approach a remediation program. But NAB did not give ASIC the figures that it had arrived at internally for remediation of the SWiFT and Encompass events. In particular, as will later be explained, NAB did not give ASIC these figures before ASIC completed and published its report into Fees for No Service as part of its ‘Wealth Management Project’ despite ASIC asking for revised figures about identified and estimated remediation.

In February 2016, Mr Damian Murphy of NAB Wealth, wrote to ASIC providing an update on the TERP trade-up event. He told ASIC that the issue was estimated to affect 96,920 members and the PSFs totalled $10,797,403.[36] An update, provided to ASIC in June 2016, again recorded that the number of members affected had increased from the 47,000 members indicated in the breach report to more than 96,920, but it also said that the financial impact then totalled $14 million.[37]

On 23 August 2016, ASIC wrote to Ms Smith and Mr Hagger confirming that it had told them that ASIC would be prepared to formalise’ the obligations of NULIS and NWMSL ‘under the TERP tradeup and PSF remediation programs’ on the basis that NULIS and NWMSL committed to remediation in an open letter and acknowledged that ASIC would monitor the implementation of the remediation programs and report publicly on them. ASIC proposed that the obligations be recorded either in an enforceable undertaking (EU) or in licence conditions.[38] ASIC otherwise rejected NAB’s proposal that the matter be resolved by what NAB had called ‘Negotiated Commitments’.[39] ASIC indicated that it may be willing to resolve the issues arising out of the SWiFT and Encompass matters on a similar basis to the TERP trade-up and PSFs remediation programs.[40] ASIC said that it expected to be informed of the response of the boards of the relevant NAB entities ‘relatively soon’.[41] ASIC also said that it considered a separate and more specific ‘Assurance Review’, by an independent external expert, was required.

Shortly after that, in emails dated 6 and 7 September 2016 between Ms Karen-Anne Herald of the Risk team and Damian Murphy, the Chief Risk Officer, Ms Herald acknowledged that provisions had been booked for the remediation of $13 million for the TERP PSF event and that provisions had been made for the SWiFT and Encompass PSF events in the amount of $21.6 million.[42]

As noted above, when the breach notification was formally provided to ASIC in respect of the SWiFT and Encompass PSF events on 16 September 2016, an estimate was given of the number of members affected by the events, but no estimate of financial loss was given.[43]

On 16 September 2016, ASIC wrote again to Ms Smith and Mr Hagger stating (once more) that ASIC considered that an independent review pursuant to an EU would be an appropriate regulatory outcome.[44] ASIC noted that it had not yet received a response from the boards of the relevant NAB entities: NULIS, NWMSL and NAB Wealth.[45]

On 19 October 2016, Mr Hagger provided an update on the PSF events to the Group Risk Return Management Committee, which included NAB’s Chief Executive Officer, Andrew Thorburn, and other senior NAB Group executives.[46] Mr Hagger said that compensation was expected to total $34.3 million for the three events.[47]

On the same day, ASIC sent an email to NAB to say that it would be publishing a public report with respect to fees for no service in the following week.[48] Andrea Debenham from NAB’s Regulatory Affairs wrote to Mr Hagger, Mr Carter, Mr Murphy and others noting that ASIC’s report would include details of the ‘TERP PSF breach’ but that it was unclear whether it ‘would extend to mentioning the SWiFT and Encompass PSF events’. Ms Debenham asked for agreement and instruction on whether the intention was to pre-emptively communicate about the TERP PSF Event and associated remediation; or all PSF events and associated remediation; or Project Rio in total; or none of these. (‘Project Rio’, an internal review of the matters raised by ASIC, was considering the appointment of KPMG to conduct an independent ‘assurance review’ of the adequacy of compliance and risk management practices in NAB’s superannuation business as a whole. In about June 2016, there had been some discussions with ASIC about such a review[49] and, as is explained below, in January 2017, ASIC required NULIS to do it.) Ms Debenham said:[50]

To be clear, I’m not necessarily proposing that we should communicate pre-emptively. Rather, I wanted to flag that if we go down that path I’ll need to engage ASIC as soon as possible. Whichever way it falls, we might need to consider how this lines up with EOY results announcements.

On 20 October 2016, Chris Owens from the Corporate Affairs team sent an email to Mr Hagger, Mr Carter and others noting that ASIC ‘plans to announce the TERP Plan Service Fee event as part of its public report on Ongoing Advice Service Fees’ and setting out ‘a number of media options to minimise reputation risk for the Group’.[51] The email said that Corporate Affairs’ ‘preferred option would see NAB proactively announce all aspects of the PSFs issue, including customer numbers and the total remediation amount’.[52] Mr Owens also suggested that NAB approach ASIC and ask it to consider delaying the announcement until after the banking reporting season.[53] NAB’s reporting of its annual financial results was scheduled for 27 October 2016.

On 21 October 2016, Ms Louise Macaulay of ASIC sent NAB a redacted draft copy of the ASIC report entitled Financial Advice: Fees for No Service.[54] The details of financial compensation in respect of NAB ‘fees for no service’ events were set out in a table. The equivalent detail in respect of other banks was redacted but the overall totals of compensation paid or agreed to be paid and estimated future compensation by all of the entities the subject of the report were not redacted.[55] The table said that the total compensation paid or agreed to be paid by all the entities examined was $23,098,808 and that the estimated future compensation was between $57 and $63 million (an overall total of $8086 million).

Later that day, Nathan Goonan, the acting Executive General Manager of Corporate Affairs sent Mr Thorburn and others an email saying that ASIC had invited feedback on the draft report. He said:[56]

At this stage, having seen the report, our thinking is to be reactive from a communication perspective given, as drafted NAB is seen as just one in the pack rather than called out as an outlier. Andrew H and team are considering this feedback and we will settle on a recommendation over the weekend.

Mr Goonan’s email attached a paper entitled Project Rio Issue Summary 21October 2016 at 4:30pm.[57] The paper said that NAB had been named in the ASIC report as having total exposure of compensation of $16.2 million for about 120,000 customers. It said that the remediation option in respect of the SWiFT and Encompass events was to be presented to NWMSL (the NAB administrator for NULIS’s superannuation business) and NULIS for approval on Monday 24 October 2016 and Wednesday 26 October 2016 respectively. The paper went on to say:

while we can’t see the other bank’s compensation details, this probably means that NAB is middle of the pack when it comes to compensation. remediation has not begun for PSF, as we have been attempting to resolve legal differences of opinion. The most likely remediation will be to ~220,000 members for approximately $34 million across TERP PSF, SWiFT and Encompass.

ASIC has invited feedback on the draft report by 10 am Monday. The relevant executives for the PSF issue (Andrew Hagger and Paul Carter) are considering this feedback. There are two possible outcomes of NAB’s feedback to ASIC.

ASIC’s report is published next week in largely the same form that it is now this would mean NAB is seen as just one of the banks tied up in [the matter]

[or] ASIC’s report is adjusted and/or delayed to include NABs expanded PSF numbers (making NAB the ‘worst’ of the banks in the report.)

The reference to ‘legal differences of opinion’ appears to be a reference to the legal advice referred to above.

Mr Hagger was responsible for the feedback that would be provided to ASIC on the draft report.[58] Mr Thorburn forwarded Mr Goonan’s email and attached paper to Mr Hagger and Antony Cahill with the request that they ‘please discuss Monday, when we meet’.[59] By an email sent shortly after that, Mr Hagger emailed Mr Cahill and copied in Mr Thorburn saying that he had had a telephone call with key stakeholders and that they intended to recommend that the current approach was the most suitable one. He said:[60]

the additional nuance is that we think I should call Greg Tanzer or Peter Kell on Monday morning to advise the latest as to where we are up to on the PSFs. All in the ongoing interests of openness and transparency. We doubt they will wish to shoe-horn the matter into their report given deadlines, their multi-phased approach and the very substantial rewrite which would be required to their report overall.

On 24 October 2016 at 8:00am the board of NWMSL met. The minutes of the meeting show that the board resolved to recommend to NULIS that NULIS approve full compensation (plus interest) for the PSF events for all non-linked members and to approve NWMSL indemnifying NULIS for the compensation.[61] The minutes noted that a full refund of the PSFs was more generous to members and that NWMSL’s preferred approach had been for opt-in compensation.

Mr Hagger left the meeting after the resolution had been passed and telephoned Mr Tanzer. On re-joining the meeting, Mr Hagger told the board about the call.

Later that morning, at 10.56am, Mr Hagger sent an email to a number of NAB employees, including Mr Carter, setting out his account of the conversation that he had with Mr Tanzer.[62] In his evidence, Mr Hagger described this email as his ‘file note’ of the discussion.[63] The email records that Mr Hagger told Mr Tanzer the NWMSL and NULIS boards were meeting ‘that week’. The email does not record Mr Hagger as having told Mr Tanzer that NWMSL had already met and resolved to approve full compensation and indemnify NULIS. The email does not record Mr Hagger as having provided any estimate or range of future compensation or any update to Mr Tanzer in respect of loss or compensation.[64]

Mr Hagger told the Commission that he said to Mr Tanzer:[65]

if he wants to know anything further of any of this, so if he said to me what do you think the dollars involved are, I would have referred him to our earlier conversation, which is that they had the number of members and I had given him an indication of approximately what the dollar figure was. So, you know, as an accountant I could have multiplied those two together. He was obviously capable of doing that.

Mr Hagger told the Commission that the ‘earlier conversation’ was a discussion he had with Mr Tanzer between the date of the breach notification (in respect of the SWiFT and Encompass events) lodged with ASIC in September 2016 and the date of ASIC’s draft report into fees for no service.[66] Mr Hagger’s evidence was that he gave ‘an indication to Mr Tanzer of the dimensions of SWiFT and Encompass in roundabout terms’ at that time.[67] He said that he told Mr Tanzer, ‘You have the number of members, and the approximate dollars involved in terms of the fees is similar, perhaps slightly bigger, per member than the TERP issue’.[68] Mr Hagger described his interaction with Mr Tanzer as ‘open and transparent’.[69]

Ms Debenham and others at NAB had met with representatives of ASIC on the preceding Friday, 21 October 2016, to discuss NAB’s response to ASIC’s draft report, and NAB gave ASIC a document setting out some requested alterations and additions to the report. One of the responses confirmed that the compensation amount for the TERP trade-up PSF event was $12.4 million plus interest and that 108,867 customers had been affected.[70] NAB said in its document that ‘[t]he figures included in the DRAFT report were sourced from the March 2016 Quarterly Breach Report Update. These amended figures are correct as at 31 August 2016’.[71]

At about 6 pm on 24 October 2016, Joanna Bird of ASIC sent Ms Debenham and others an email setting out ASIC’s responses to NAB’s request for alterations and additions to the report. Ms Bird’s email noted that ‘all institutions have now provided us with updated estimates’, noted that ASIC proposed ‘to give current estimates’ in the relevant tables in the report, noted that ASIC would use the figures given in NAB’s 7 October monthly update and said that ‘[i]f you have an October estimate for the MLC Nominees compensation we will include it [o]therwise we will use the 108,867, $12.4M figure’. Ms Debenham replied later that evening. In response to the questions Ms Bird had asked about updated estimates, Ms Debenham annotated Ms Bird’s email saying ‘Thank you. Please use the 108,867, $12.4M figure’.[72]

Mr Hagger signed a letter dated 24 October 2016, on behalf of NWMSL, to the Board of Directors of NULIS.[73] The letter had been approved at the board meeting on the morning of 24 October 2016 before Mr Hagger’s call to Mr Tanzer. The letter told the board of NULIS that NWMSL intended to indemnify NULIS for the PSF remediation. The letter set out the two alternative approaches to remediation, one described as the ‘optin’ approach and the other as the ‘full compensation’ approach. The letter said that both approaches were reasonably arguable, although the ‘full compensation’ approach was preferred. The letter said that the decision rested with NULIS as the trustee.

On 26 October 2016, the joint board of MLC Nominees, NULIS and PFS Nominees met and approved the ‘full compensation’ approach. This approach affected 220,515 member accounts and was estimated to involve a refund of $33.7 million in PSFs charged, plus compensation.[74] There was no suggestion in the evidence that Mr Hagger or anyone else at NAB or NULIS informed ASIC on that day about this meeting or its outcome.

On the following day, 27 October 2016, ASIC published the Fees for No Service report. The report was circulated by email within NAB and NULIS.[75] The email said ‘of particular note is that the compensation numbers have increased markedly since the draft was issued on Friday for example, CBA has $105m to pay’.[76]

Subsequently, on 3 November 2016, representatives of NAB Wealth gave a PowerPoint presentation to representatives of ASIC that provided an update on the PSFs event. The presentation told ASIC that the total PSF amount was approximately $34.6 million.[77] After the meeting, an internal email was sent to Mr Tanzer and others within ASIC which said that:[78]

  • On 14 September, NAB lodged two fresh breach notices covering these PSF events. The notices have scanty information and no estimates of compensation. ASIC has continued to [seek] further information on these two new PSF breaches but the information was not forthcoming.
  • Today’s update radically revises the previous compensation estimates to a total of $34 million including interest. The revised figure is concerning because the company has known about the events for approximately 11 months and has only just presented the figures in a meeting today (no formal letter and just a hardcopy powerpoint presentation). We are questioning whether the imposition of licence conditions is sufficient in this situation.

The evidence was not clear as to whether Mr Hagger was present at the meeting on 3 November 2016, and noone who attended the meeting gave evidence before the Commission. The contents of the presentation and emails, however, were not challenged by NAB or NULIS.

Ms Smith said that the PSFs were turned off for MKBS and MKPS members with no linked adviser (including those who were part of the Encompass trade-up and Project SWiFT) by 30 October 2016.[79] She said that a small subset of additional members with no linked adviser was later identified and that their PSFs were turned off by 17 January 2017.

In February 2017, NULIS agreed to ASIC imposing additional licence conditions on NULIS’s Australian financial services licence. Ms Smith said that NULIS agreed to the imposition of those conditions because it had assumed the rights and liabilities of MLC Nominees as trustee.[80] One of the added conditions was that NULIS engage an ASIC-approved independent expert to assess and report on the adequacy of its compliance and risk management practices for its superannuation business.[81]

Members affected by the PSF events were paid compensation in June and July 2017.[82]

On 26 July 2018, NAB published an ASX announcement saying that NULIS would stop deducting the PSF from MKPS member accounts from 30 September 2018 and that all MKPS members would be fully refunded for PSFs paid while in the product.[83] The announcement said that the PSF would be switched off for members of the MKBS on 30 November 2018 and that after this time no MLC products would have a PSF attached.

Adviser Service Fees

PSFs were not the only form of fees charged by MLC Nominees, and then NULIS, where there were issues about charging fees for no service. In its 29 January 2018 submission in response to my initial inquiries, NAB said that ASFs had been incorrectly charged to customers between 2008 and 2015. The submissions said that:

In some cases, ongoing advice fees were charged when no adviser was attached to the client. Estimates (as at 30 September 2017) are that approximately 25,000 customers were affected and approximately $6.6 million of fees were charged.

A further issue that is being investigated is whether, in cases where advisers were attached to the customer, the relevant services were provided to the customer. This is a review into whether the contracted services were provided, not whether the advice was appropriate.

Although NAB’s 29 January 2018 submission referred to charging ASFs incorrectly between 2008 and 2015, Ms Smith gave evidence that between July or August 2014 and May 2018, NAB entities had identified four events, and made three breach reports to ASIC and APRA in relation to the charging of ASFs.[84] Something more must be said about each of these identified events.

Four identified events

In July or August 2014, NAB identified that members continued to have ongoing ASFs deducted from their accounts despite a request having been received to remove the allocated adviser from a member’s account.[85] The event was reported to APRA and ASIC on 22 December 2014.[86] Ms Smith said that 8,126 members were affected and that the quantum of fees (gross of tax) in issue was $1,541,748.[87]

In about August 2015, NAB identified an issue relating to ASFs deducted from members’ accounts and paid to advice licensees (both external and related party licensees) where the adviser was ‘inactive’ or the advice dealer group was ‘inactive’. Ms Smith said that the first kind of case (where the adviser was inactive) was determined not to be reportable;[88] the second kind of case was notified to ASIC in correspondence on 25 November 2016 as a non-significant breach.[89] Ms Smith said that neither the number of members affected nor the quantum of fees in issue in respect of the first kind of case was available ‘as a remediation plan is being finalised’.[90] She said that the second kind of case affected 4,687 members and that $308,497 fees were in issue.[91]

In about May 2017, NAB identified a control breakdown in the process of adviser remuneration, which resulted in ASFs being retained by the trustee instead of being paid to the advice licensee of the financial adviser listed on the member account.[92] This was known as ‘Adviser Remuneration Suppression’ and was reported to ASIC and APRA on 20 July 2017.[93]

The NULIS Board received an update on the Adviser Remuneration Suppression event at a board meeting on 18 April 2018. The update said that the event went beyond ASFs and that members had also paid PSFs and commissions that had not been paid to advisers and had, instead, been retained by the trustee as revenue.[94] An appendix to the paper showed a breakdown of the event’s effect that suggests that NULIS retained in excess of $18 million in commissions and in excess of $800,000 in ASFs.[95] Ms Smith told the Commission that 14,663 members were affected and that $1,879,903 fees (gross of tax) were in issue.[96] In March 2018, NULIS told APRA that the ‘total suppression’ value since 2001 was about $1.5 million, of which about $750,000 would be ‘released to members’ because the advice licensee was no longer active.[97] In the end I am unable to say from the evidence what amounts would be required to be paid to advisers or returned to members.

In May 2018, NAB identified that, after notification of some members deaths, ASFs had continued to be deducted from those members’ accounts for a period, or until the finalisation and distribution of the benefit.[98] On 15 June 2018, NAB reported the matter to ASIC and APRA.[99] Ms Smith said that ‘based on current analysis’ 4,135 member accounts were affected and $3,018,945 in fees were in issue.[100] Ms Smith said that, from 25 May 2018, NULIS ceased deducting ASFs from member accounts upon notification of the member’s death, and that, by 27 June 2018, it had ceased deducting ASFs from individual members’ accounts where notification of death had been received before 25 May 2018.[101]

It may be observed that NAB took the steps it did only after there had been a lot of adverse public comment provoked by evidence given to the Commission about other entities continuing to charge advice fees after the death of the client. Ms Smith said in her statement to the Commission in August 2018 that she understood that a remediation plan was then being developed.[102]

Taken together, the four events concerning ASFs that were described by Ms Smith affected more than 31,000 customers and related to more than $6.6 million in fees. But these were anything but final figures. Ms Smith told the Commission that the issue of incorrect charging of ASFs was the subject of continuing investigation and review within the NAB Group, with a particular focus on NAB’s advice licensees.[103] When Ms Smith gave her evidence, NAB was still negotiating with ASIC about how NAB licensees should go about compensating affected members.

It is necessary to say something more about NAB’s negotiations with ASIC about the issues relating to fees for no service. The negotiations extended over about three years. The various positions taken by NAB in those negotiations appeared primarily directed to minimising the amount that NAB would have to refund.

NAB’s negotiations with ASIC in relation to ASFs

On 5 June 2015, Ms Louise Macaulay from ASIC wrote to Andrew Hagger noting that ASIC had commenced an investigation regarding financial services licensees charging ASFs without providing advice.[104] Mr Hagger was then Group Executive for NAB Wealth. Ms Macaulay asked Mr Hagger to ‘scrutinise the operation of all of the Australian financial services licensees that form part of the NAB Group which provide personal financial advice to retail clients, to ascertain whether there are issues related to incorrect charging of advice fees’, to the extent that this had not already been done.[105]

Mr Hagger told the Commission that NAB disagreed with ASIC about the way to establish whether services had been provided or not.[106] The methodology was financially significant to NAB. NAB entities would have to refund the fees to customers when the chosen methodology identified that they, or the advisers concerned, had not provided the service that had entitled them to the fee.

During 2016, NAB developed a method of assessing service delivery. It depended upon ‘sampling’ and appears to have begun in May 2016. Deloitte was retained to examine a sample of cases and confirm whether an annual review of a customer’s financial arrangements had been provided or an offer of a review had been made by phone or letter.[107] NAB may have expected that the sampling would reveal no failures.[108] However, in respect of NAB Financial Planning, the Deloitte sampling concluded that 54 (92%) ‘passed’ the requirement, but 5 (8%) ‘failed’. The results of the sampling were provided to ASIC in October 2016.

In December 2016, NAB told ASIC about a different approach.[109] NAB introduced the notion that it would look at whether there had been a ‘fair exchange of value’ rather than whether the specific, and contractually stipulated, ongoing services had been provided.[110] NAB said this was a ‘customer centric approach’, which would look at a range of factors and would ‘outscope clients where we can see evidence points to demonstrating service delivery over a 7 year period’.[111] ASIC rejected the approach. ASIC said that it was not a ‘customer centric approach’.[112]

During 2017, NAB made new remediation proposals. In July 2017, Mr Hagger wrote to ASIC outlining an approach that included ‘assurance’ for one segment of members, for which there was a level of ‘interaction data of the nature to be expected consistent with the customer access to services’. For another segment, for which there was ‘no digital interaction in the duration of the customer relationship over the period in question’, Mr Hagger said that other forms of evidence would be sought ‘which may include paper files (where appropriate), adviser attestation and contacting clients’. The letter set out a list of ‘information points’ that were said to demonstrate that advisers and licensees had met their contractual obligations, including statements of advice and other advice documents, product transaction data, client meeting records, fee disclosure statements and emails and file notes.[113]

In October 2017, ASIC provided NAB with a paper titled Outline of Suspected Offending by the NAB Group. The Outline set out ASIC’s views about fees for no service conduct of NAB and NAB’s related entities, as well as other issues.[114] ASIC said it did not accept NAB’s proposed methodology of testing whether a ‘customeradviser interaction’ had taken place instead of whether the stipulated services had been delivered to customers.[115] ASIC said that NAB’s approach might fail to identify and compensate customers who did not receive the ongoing services they paid for. ASIC said that it expected that NAB would

take all necessary steps to ensure that:

  • affected customers are identified and continue to be remediated; and
  • services are provided to clients in accordance with contractual obligations, financial services laws and applicable Australian financial services licence conditions.

On 3 November 2017, Ms Macaulay of ASIC wrote to Sharon Cook, General Counsel of NAB.[116] She noted that Ms Cook had recently taken over responsibility for the fees for no service issues, and attached a timeline of past events. The timeline set out the negotiations that had taken place and NAB’s most recent proposal, referred to above. The letter reiterated that NAB’s proposal to take account of evidence of, for example, an email with a newsletter to a customer, was not evidence of an annual review and therefore not evidence that NAB had provided the services set out in customer service agreements.[117] Ms Macaulay’s letter also said that NAB’s approach to remediation was ‘out of step with some of its major peers that have reported fees for no service failures and are close to finalising their customer review and remediation programs for these failures’.

At a NULIS Board meeting held on 7 and 8 December 2017, a paper was presented to the board entitled Risk Review of ASF Controls.[118] The paper contained an assessment of controls in place in relation to ASFs. Appendix 1 to the paper said that, in relation to the control environment for ASFs:

  • The controls for ensuring that all fees were paid to advisers were ‘ineffective overall’. One reason for this was that no reconciliation was performed by the Finance division to ensure that all ASFs were paid onto advisers and not retained by NULIS.
  • The controls for monitoring the charging of fees against the delivery of services were ‘non-existent’. For example, no attestations were obtained from advisers to confirm that a service had been provided for the fee paid and there was too much reliance on member communications.
  • The controls for ensuring that customers provided consent to ASFs were ‘ineffective’.
  • The controls for monitoring that fees are reasonably commensurate with the expected service were ‘ineffective’.
  • The obligation and control documentation controls were ‘ineffective’.
  • The adviser on-boarding enhancement controls were ‘ineffective’.
  • The controls for member communication and disclosure pre/post an ASF being initiated were ‘ineffective’.

The paper said, in respect of next steps, that actions to remediate and uplift the control environment would be worked through with executive management.

Ms Smith told the Commission that this review was requested by the board as a result of the succession of events in respect of ASFs. She said that, at the time of giving her evidence, the trustee had not looked back as a result of these findings, but that she expected that any failings would be revealed during the control improvement process.[119]

On 13 April 2018, Ms Cook wrote to ASIC proposing another approach to remediation in relation to the ASFs. She said to ASIC that, for customers who commenced their ongoing service arrangements with NAB Financial Planning prior to the commencement of the Future of Financial Advice (FoFA) reforms, NAB would offer ASIC the opportunity to request a review of service delivery under their ongoing service arrangements during the relevant period. That is, she proposed an ‘optin’ method of remediation. She said that:[120]

Our approach may not be consistent with steps being taken by some of our industry peers, however, we consider a different approach is warranted given NAB led the industry away from commission based adviser remuneration structures

Hindsight suggests that NAB might be better served if we elected, like many of our peers did, to take the easier and more commercially attractive option of placing continued reliance on commission arrangements until the long tail of the generous FoFA grandfathering regime eventually runs out. Instead, NAB backed the views of ASIC, along with our own convictions, as we believed it to be the right thing to do to move the industry away from commissions and give customers visibility over the fees they pay. This was in the best interests of our customers.

Asking that NAB now conduct a historical (pre-FoFA) review of how we transitioned customers, advisers and product issuers to fee for service arrangements (in circumstance[s] where there was no corresponding regulatory requirement to do so) challenges whether NAB ought to have taken a leadership position in this regard. But for the changes, the Pre-FoFA Customers would have continued to be in commission paying arrangements.

The appeal, in this letter, to what NAB might have done is important and revealing. It focused upon how NAB might have charged and retained the revenue that it now faced having to repay to clients. The reference to what NAB might have done, and the letter generally, ignored the more basic facts that NAB entities had promised to provide services, had not provided the services but had charged for what had not been provided. Even up to April 2018, NAB continued to deal with ASIC on a basis that sought to put these basic facts aside.

On 9 May 2018, Mr Mullaly and Ms Bird wrote to Ms Cook and Ms Smith noting that NAB had failed to deal with all of ASICs concerns raised in the Outline of Suspected Offending ASIC had given NAB in October 2017.[121] The letter said that the ‘proposed resolution set out in your letter fails to adequately reflect any insight into the seriousness of the suspected misconduct, which took place over an extended period of time and affects a substantial number of customers.’

On 7 June 2018, representatives of NAB, including Ms Smith and Ms Cook, met with representatives of ASIC. NAB provided to ASIC a draft EU in relation to the ASFs.[122]

On 26 June 2018, NAB wrote to ASIC. It said that it would be remediating clients and members who had paid ASFs where there was no evidence to substantiate the provision of service.[123] This proposal was made more than four years after NAB had first reported an ASFs event to ASIC. Ms Smith told the Commission that she expected that the advice licensee, in its review of whether or not a service has been provided, ‘will ensure that any superannuation members who have paid an advice fee and not received a service will be identified during that review process and will be remediated by the advice licensee’.[124]

Mr Hagger told the Commission that NAB had agreed to use a methodology in relation to NAB Financial Planning’s remediation that was closer to what ASIC had proposed.[125] When he gave evidence, he said that NAB had not yet agreed to this methodology for its other advice licensees.[126]

Breach reporting

As appears from the description given above of events relating to charging fees for no service, NAB did not always notify ASIC of a significant breach, or likely significant breach, within the time required by section 912D of the Corporations Act.

After the Commission’s hearings into superannuation had ended, ASIC published its Report 594, entitled Review of Selected Financial Services Groups’ Compliance with the Breach Reporting Obligation. The report examined the breach reporting processes of 12 financial services groups, including NAB. The key findings of the report included that:[127]

  • Financial institutions are taking too long to identify significant breaches, with the major banks taking an average of 1,726 days (more than 4.5 years).
  • There were delays in remediation for consumer loss. It took an average of 226 days from the end of a financial institution’s investigation into the breach and first payments to impacted consumers. (This was on top of already significant delays in institutions starting and concluding their investigations after the breach had been discovered, which averaged across all institutions as 1,517 days.)
  • The significant breaches (within the scope of the review) caused financial losses to consumers of approximately $500 million, with millions of dollars of remediation yet to be provided.
  • The process from starting an investigation to lodging a breach report with ASIC also took too long, with major banks taking an average of 150 days.

To the extent that these findings related to NAB or its associated entities, ASIC’s finding were consistent with evidence given and other material available to the Commission.

On 26 April 2018, Mr Shipton, Chair of ASIC, discussed NAB’s breach reporting with Mr Thorburn, CEO of NAB. The briefing prepared for Mr Thorburn in advance of the meeting said that ASIC was conducting a project on breach reporting and that ASIC will likely seek further engagement with NAB about the extent of the issue noting that NAB appears to be an outlier to industry’.[128]

On 27 April 2018, after the meeting between Mr Thorburn and Mr Shipton, ASIC wrote to NAB saying that, during the period between 2014 and 2017, there appeared to be 110 breach reports from licensees within the NAB group that were lodged with ASIC in excess of the maximum allowable 10 business days.[129]

On 15 May 2018, NAB responded and said that between 2014 and 2017 there had been 84 reports of significant breaches provided beyond the statutory requirement of within 10 business days.[130] Eighty-three of these were said to relate to NAB Wealth.[131]

Ms Smith told the Commission that a breach review committee for wealth entities within NAB considered breach events and whether they were reportable.[132] She said that, from the trustee’s perspective, ‘we had probably poor performance on-time delivery to ASIC up until around 2015 where we had an independent review from PwC on the breach review committee process. And I think from that date we’ve shown improvement in our timing’.[133]

1.2.2Grandfathering of commissions

As I have previously noted, until July 2016, NULIS was one of three RSE licensees within the NAB Group; the other two were PFS and MLC Nominees.

On 1 July 2016, the members of the TUSS fund previously under the trusteeship of MLC Nominees were transferred to the MLC Super Fund by way of an SFT.[134] NULIS, the new trustee, considered maintaining, and decided to maintain, payments of grandfathered commissions that were being paid by members of the TUSS fund to advisers. Both Mr Carter and Ms Smith agreed that the proposal presented two main issues. First, was it lawful under the FoFA legislation to grandfather commissions after an SFT? Second, was it in the best interests of members to do so?[135]

The legal issue was thought to be resolved by treating the trustee that paid the commission as a ‘platform operator’. For present purposes I need say no more than that this view of how the relevant provisions of the Act operate may be thought not to leap from the page of the statute.[136] But the point need not be examined. It is enough to record that NAB discussed the proposal with ASIC and ASIC did not object.[137]

The issue about best interests was resolved by reference to two points: first, that if commissions were not maintained, advisers would become disaffected and the fund would receive fewer new members and contributions; and second, that the proposal left members no worse off in the sense that they would continue to pay the amounts they would have been paying before the transaction.

On 10 June 2016, the board of NULIS considered a management paper on the issue. The paper gave three options for consideration:[138]

  • Option 1: Continue the grandfathering arrangements and pay commission to advice licensees.
  • Option 2: Cease the payment of grandfathered commission by terminating the remuneration arrangements with advice licensees; and
  • Option 3: Stop commission payments and set up alternative remuneration arrangements for advisers.

The paper said that management had examined several issues in connection with each proposal: whether the proposal was legally permissible; whether the proposal maintained equivalency of members’ rights and was in members’ best interests; other member consequences; and implications for the SFT and the associated future member benefits.

Ms Smith accepted that the members’ best interests was a question for the trustee to decide.[139] She said that the trustee ‘turned their mind to best interests of the SFT as a whole and determined that the SFT, including the grandfathering of commission, was in the best interests of members’.

The management paper set out the background to the then current payment arrangements.[140] It pointed out that there were about 188,000 members ‘in commission paying retail super/pension products in TUSS’, and that these members made up about 63% of members holding about 47.7% of funds under management in TUSS.[141] It said that approximately ‘$56 million in commission per annum is paid in respect of TUSS products’.[142]

When discussing termination of remuneration arrangements with advice licensees, the paper said that separate advice would have to be obtained about whether termination would expose MLC Nominees, NULIS or any other entity in the NAB Group to liability for breach of contract.[143] No estimate was given of the compensation that might be payable to advisers if liability arose. The only reference to quantum was to the total commission paid per annum in respect of TUSS Products, which was said to be $58 million.[144]

Ms Smith agreed, however, that NULIS did not have any legal obligation to pay commissions at the time[145] and Mr Carter also agreed that NULIS would not have been in breach of contract, as it did not have any contracts with advisers prior to the SFT.[146]

The paper said that ceasing commissions may lead to significant member attrition due to ‘financial adviser dissatisfaction’. It said that this, in turn, may lead to a significant reduction in funds under management, leading to higher costs for remaining members and reduced competitiveness of each product, thereby threatening the sustainability of the fund as a whole.[147] The paper said: ‘In a post FoFA world, where monetary incentives are removed, financial adviser satisfaction is paramount’.[148] Mr Carter agreed that if NULIS maintained commissions for financial advisers, then advisers would not look to move their clients to another superannuation provider.[149]

The paper recommended that the directors approve maintaining current grandfathered commission arrangements. The paper said that management believed that the cost and effort required to adopt the third approach (of stopping commission payments and setting up alternative remuneration arrangements for advisers) was not in members’ best interests.[150]

The management paper told the board that the SFT may be delayed by as much as 12 months if option three was adopted. It said this would ‘impact future initiatives as the work effort will divert time, resources and funding away from other strategic initiatives’.[151] But Mr Carter’s evidence was that all of the benefits of the SFT could be achieved without grandfathering commissions.[152]

As already mentioned, NAB had consulted with ASIC about the intention to grandfather commissions.[153] The management paper said that the purpose of this consultation was to seek ASIC’s views on the legal application of the grandfathering provisions given the level of ‘interpretation risk’ due to the fragmentary and untested nature of the FoFA regulations.[154] A briefing paper dated 20 May 2016 was provided to ASIC and was annexed to the management paper.[155] It set out the bases upon which NAB said that NULIS was a platform operator and told ASIC of its intention to continue grandfathering commission payments.[156] The evidence was that, after providing ASIC with the briefing paper, representatives of NULIS met with ASIC and indicated that it was not seeking a ‘no action’ letter, but would proceed on the basis of the legal advice it had received.[157]

1.2.3MySuper

The Commission considered the steps taken by NULIS to transfer accrued default amounts (ADAs) to MySuper products and some issues about what appeared to be the poor performance of its MySuper products.

NAB RSE licensees initially offered two MySuper products: an MLC MySuper product of which MLC Nominees was trustee and a Plum MySuper product of which PFS Nominees was trustee.[158]

The NAB RSE licensees did not transfer the majority of ADAs into a MySuper product until 2016.[159] They transferred other ADAs to a MySuper product in 2017.[160] The speed of transfer can be indicated by observing that, at 30 June 2014, the total ADAs across the whole superannuation industry were worth about $73.1 billion, of which MLC held $17 billion.[161] By 30 June 2015, the industrywide value of ADAs had fallen to $59.2 billion but MLC’s had fallen only slightly: to $16.1 billion.[162] At 30 June 2016, the equivalent figures were $41.3 billion and $13.9 billion.[163] That is, at the start of the industrywide process of transferring ADAs to MySuper, MLC had less than one quarter of all ADAs but two years later, at 30 June 2016, it held more than one third of all ADAs.[164]

Ms Smith accepted that one consequence of not moving ADAs into MySuper until 2016 or 2017 was that members paid higher fees, including the PSFs, for longer than they would have paid if the transfers had been made sooner.[165] She also accepted that members with ADAs would have been paying a higher administration fee in MKBS/MKPS than in the MySuper product[166] and may have been paying adviser contribution fees.[167]

Each year, the trustee of a MySuper product must determine whether the beneficiaries of the fund who hold the MySuper product are disadvantaged by factors such as the fund’s scale, when compared to MySuper beneficiaries of other funds.[168]

NULIS has made the necessary scale determinations each year. The papers put to NULIS’s board in October 2016 for the purposes of the 2016 scale determination recorded that various ‘MySuper investment structure enhancements had been implemented over the last 12 months’.[169] Among other things, the trustee (NULIS from 1 July 2016) reduced its profit margin on the operations of the product by five basis points.[170]

The papers put to the board noted that ‘when standard fees are compared against the ChantWest universe of MySuper products’, the MLC Super Fund MySuper product and the NAB Staff MySuper product ranked 66th and 44th respectively.[171] The analysis also said that the MLC MySuper product was in the bottom quartile of MySuper products for performance, after investment fees were taken into account.[172]

Why this was so was explored in evidence.

A quarterly investment report dated June 2017 conducted by JANA Investment Advisers Pty Ltd and considered by the board of NULIS,[173] said that the initial fee budget for the NAB MySuper products placed a significant limitation on the level of illiquid assets in the portfolio and that creating a new option with ‘zero dollars’ on ‘day one’ meant that the relevant MySuper option was going to have a lower allocation to illiquid assets relative to peers. The report said that the underweighting of illiquid assets in the MySuper option occurred when illiquid assets were having their strongest historical gains due to a low interest rate environment.[174]

Performance was also affected by fees. NULIS retains the portion of the investment fee charged to members that is not paid to others for managing the assets of the fund. The amounts retained by NULIS are paid as dividends to NULIS’s shareholder, NWMSL (the administrator).[175] Ms Smith said she believed that the dividend NULIS paid was usually more than $100 million per year.[176] (She said that dividends were payable quarterly but that ‘as a result of the PSF matter’ there had been two quarters where NULIS had not paid a dividend.)[177]

Ms Smith said that NULIS had made the decision referred to in the papers for the 2016 Scale Assessment (to take a lower profit margin from the superannuation activities) so that more money could be applied to investments[178] to deal with the underperformance of the MySuper option.[179] She said that the budget for investment options and the profit to the NAB Group comes from the investment management fee and that, if a larger amount of the investment fee collected were allocated to investment options, the NAB Group would take less profit, or the fee would have to increase, so that profits of the NAB Group did not decrease.[180] Ms Smith said that before the SFT in 2016, MLC Limited (not MLC Nominees) had controlled how much of the investment fee would be used for the management of assets,[181] but that since the SFT, NULIS has had control over how much of the investment fee would be used for the management of assets. She said that NULIS had not yet allocated more of that fee to the management of MySuper assets.[182]


[1] FSRC, Interim Report, September 2018, vol 1, 124.

[2] FSRC, Interim Report, September 2018, vol 1, 124.

[3] Transcript, Peter Kell, 17 August 2018, 5254.

[4] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 5 [12].

[5] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 5 [11].

[6] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 6 [14], [17].

[7] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 6 [19].

[8] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 6 [20].

[9] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 5 [13].

[10] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 5 [13].

[11] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 5 [13].

[12] Exhibit 5.388, 14 July 2015, Legal Memorandum MKBS and MKPS Fees Final, 9 [3.14], 10 [3.18].

[13] See, eg, Exhibit 5.20, 8 January 2018, Briefing Note Concerning PSF Events Prepared by Service Provider Management, 5 [2.15].

[14] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 6 [17].

[15] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 7 [21].

[16] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 7 [21].

[17] ASIC v MLC Nominees Pty Ltd & Anor NSD 1654/2018.

[18] Concise Statement filed on behalf of ASIC dated 12 October 2018. See also Originating Process filed on behalf of ASIC dated 12 October 2018.

[19] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 7 [22].

[20] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 8 [26].

[21] Exhibit 5.388, 14 July 2015, Legal Memorandum MKBS and MKPS Fees Final, 5.

[22] Exhibit 5.388, 14 July 2015, Legal Memorandum MKBS and MKPS Fees Final, 1011.

[23] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, Exhibit NSS-1 (Tab 6) [NAB.005.848.0001 at .0007].

[24] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, Exhibit NSS-1 (Tab 6) [NAB.005.848.0001 at .0005].

[25] Exhibit 5.149, 24 December 2015, Breach Report MLC Nominees.

[26] Exhibit 5.149, 24 December 2015, Breach Report MLC Nominees, 3.

[27] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 9 [35]; Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, Exhibit NSS-1 (Tab 13) [NAB.005.067.6509].

[28] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 9 [37].

[29] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 9 [38].

[30] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 10 [42].

[31] Exhibit 5.14, 3 May 2016, Invitation of 3 May 2016 from Buchanan and Its Attachment Investigation into Project Swift; Exhibit 5.21, 24 August 2016, Email to and from Carter and Others, PSF Management Paper to Trustee, August 2016; Exhibit 5.22, 19 September 2016, Email, Stimson to Carter, Plan for PSF Meeting with Hagger.

[32] Transcript, Nicole Smith, 7 August 2018, 4333.

[33] Transcript, Nicole Smith, 7 August 2018, 4334.

[34] Transcript, Paul Carter, 7 August 2018, 4267; see also 4272.

[35] Exhibit 5.25, 15 October 2016, Emails Bourguignon, Carter and Others, October16, PSF Management Paper Opt-In Compensation.

[36] Exhibit 5.150, 24 February 2016, Letter, NAB Wealth to ASIC.

[37] Exhibit 5.151, 18 June 2016, Email, Murphy to Hagger and Attached Tables.

[38] Exhibit 5.49, 23 August 2016, Letter ASIC to Smith and Hagger.

[39] Exhibit 5.49, 23 August 2016, Letter ASIC to Smith and Hagger.

[40] Exhibit 5.49, 23 August 2016, Letter ASIC to Smith and Hagger.

[41] Exhibit 5.49, 23 August 2016, Letter ASIC to Smith and Hagger.

[42] Exhibit 5.393, 7 September 2016, Email Woolrich to Murphy.

[43] Exhibit 5.43.17, Witness statement of Nicole Smith, MLCN ASIC Breach PSF for Swift Encompass, 14 September 2016.

[44] Exhibit 5.51, 16 September 2016, Letter ASIC to Smith and Hagger.

[45] Exhibit 5.51, 16 September 2016, Letter ASIC to Smith and Hagger.

[46] Exhibit 5.29, 19 October 2016, Extract from Minutes of Group Risk Return Management Committee Meeting.

[47] Exhibit 5.29, 19 October 2016, Extract from Minutes of Group Risk Return Management Committee Meeting.

[48] Exhibit 5.405, 19 October 2016, Email, NAB Internal Email about ASICs Public Report on Ongoing Advice Service Fees.

[49] Transcript, Andrew Hagger, 13 August 2018, 4734.

[50] Exhibit 5.146, 19 October 2016, Emails Entitled ASIC ASF/PSF Reporting between Debenham, Hagger and Others, 26 September 2016 and 19 October 2016.

[51] Exhibit 5.30, 20 October 2018, Emails Carter, Hagger and Others.

[52] Exhibit 5.30, 20 October 2018, Emails Carter, Hagger and Others.

[53] Exhibit 5.30, 20 October 2018, Emails Carter, Hagger and Others.

[54] Exhibit 5.31, 21 October 2018, Email Macaulay of ASIC to NAB Concerning Confidential Draft Report.

[55] Exhibit 5.32, 21 October 2016, Draft ASIC Report Financial Advice Fees for No Service.

[56] Exhibit 5.35, 22 October 2016, Email Thorburn to Hagger and others.

[57] Exhibit 5.36, 21 October 2016, Project Rio Issue Summary Attached to Email.

[58] Transcript, Paul Carter, 7 August 2018, 4297; see also Transcript, Andrew Hagger, 13 August 2018, 4371.

[59] Exhibit 5.35, 22 October 2016, Email Thorburn to Hagger and Others.

[60] Exhibit 5.153, 22 October 2016, Email Hagger to Cahill and Thorburn.

[61] Exhibit 5.41, 24 October 2016, Minutes of Meeting at 8am, NWMS Limited.

[62] Exhibit 5.37, 24 October 2016, Email Hagger to Debenham.

[63] Transcript, Andrew Hagger, 13 August 2018, 4758.

[64] Transcript, Paul Carter, 7 August 2018, 4300.

[65] Transcript, Andrew Hagger, 13 August 2018, 4761.

[66] Transcript, Andrew Hagger, 13 August 2018, 4757.

[67] Transcript, Andrew Hagger, 13 August 2018, 4757.

[68] Transcript, Andrew Hagger, 13 August 2018, 4757.

[69] Transcript, Andrew Hagger, 13 August 2018, 4771.

[70] Exhibit 5.157, 24 October 2016, Email Murphy to Hagger and Attached Tables.

[71] Exhibit 5.157, 24 October 2016, Email Murphy to Hagger and Attached Tables.

[72] Exhibit 5.156, 24 October 2016, Emails between Debenham, ASIC and Others.

[73] Exhibit 5.38, 24 October 2016, Letter NWMSL to NULIS.

[74] Exhibit 5.39, 26 October 2016, Minute of Resolution of NULIS Board and Accompanying Paper by Carter, Remediation Plan Service Fee Events.

[75] Exhibit 5.40, 28 October 2016, Email Hopwood to Carter and Others.

[76] Exhibit 5.40, 27 October 2016, Email Hopwood to Carter and Others.

[77] Exhibit 5.159, 3 November 2016, Update to ASIC Slide Pack.

[78] Exhibit 5.319, 3 November 2016, Email Mitchell to Mr Tanzer and Others.

[79] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 10 [44].

[80] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 1011 [48].

[81] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 11 [48].

[82] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 10 [46].

[83] Exhibit 5.44, Witness statement of Nicole Smith, 3 August 2018, Exhibit NSS-2 (Tab 1) [NAB.005.817.0001].

[84] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 15–16 [70]–[73].

[85] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 14 [67], 15 [70].

[86] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 17 [78]–[79].

[87] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 16 [74].

[88] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 19 [95].

[89] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 18 [93].

[90] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 16 [74].

[91] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 16 [74].

[92] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 15 [72].

[93] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 19 [100]–[102].

[94] Exhibit 5.398, 18 April 2018, Wealth Entities Board/Committee Paper Coversheet.

[95] Exhibit 5.399, Undated, Appendix 2: Impacted Product Breakdown.

[96] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 16 [74].

[97] Exhibit 5.436, 4 March 2018, 20180305 NULIS APRA Qrtly Liaison Mtg Briefing Planner Updated 4 March 930pm.docx, 11.

[98] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 15 [67], 16 [73].

[99] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 20 [109]–[110].

[100] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 16 [74].

[101] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 21 [112]–[114].

[102] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 21 [115].

[103] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 15 [69].

[104] Exhibit 5.160, 5 June 2015, Letter ASIC to Hagger.

[105] Exhibit 5.160, 5 June 2015, Letter ASIC to Hagger.

[106] Transcript, 13 August 2018, Andrew Hagger, 47956.

[107] Exhibit 5.69, 3 November 2017, Letter from ASIC to Cook, 4.

[108] Exhibit 5.69, 3 November 2017, Letter from ASIC to Cook, 5.

[109] Exhibit 5.60, 18 January 2017, Emails Concerning Assurance Review of Adviser Service Fees, January 2017 between Hopwood, ASIC and Others.

[110] Exhibit 5.60, 18 January 2017, Emails Concerning Assurance Review of Adviser Service Fees, January 2017 between Hopwood, ASIC and Others, 3.

[111] Exhibit 5.60, 18 January 2017, Emails Concerning Assurance Review of Adviser Service Fees, January 2017 between Hopwood, ASIC and Others, 3.

[112] Exhibit 5.60, 18 January 2017, Emails Concerning Assurance Review of Adviser Service Fees, January 2017 between Hopwood, ASIC and others, 23.

[113] Exhibit 5.162, 5 July 2017, Letter, Hagger to Macaulay.

[114] Exhibit 5.68, 27 October 2017, Outline of Suspected Offending by NAB.

[115] Exhibit 5.68, 27 October 2017, Outline of Suspected Offending by NAB, 13.

[116] Exhibit 5.69, 3 November 2017, Letter from ASIC to Cook.

[117] Exhibit 5.69, 3 November 2017, Letter from ASIC to Cook, 5.

[118] Transcript, Nicole Smith, 9 March 2018, 4479–81; Exhibit 5.71, 12 August 2017, Extract from Board Papers, MLC Nominees, PFS Nominees, NULIS.

[119] Transcript, Nicole Smith, 9 August 2018, 44845.

[120] Exhibit 5.76, 13 April 2018, Letter from NAB to ASIC.

[121] Exhibit 5.77, 9 May 2018, Letter from ASIC to Cook and Smith.

[122] Exhibit 5.81, 28 June 2018, Letter from ASIC to Cook and Smith.

[123] Exhibit 5.80, 26 June 2018, Letter from NAB to ASIC.

[124] Transcript, Nicole Smith, 9 August 2018, 4485.

[125] Transcript, Andrew Hagger, 13 August 2018, 4801.

[126] Transcript, Andrew Hagger, 13 August 2018, 4801.

[127] ASIC, Media Release 18-284MR, 25 September 2018.

[128] Exhibit 5.78, 8 May 2018, Briefing Planner for Meeting of 26/05/2018 between Thorburn and Shipton.

[129] Exhibit 5.44, Witness statement of Nicole Smith, 3 August 2018, Exhibit NSS-2 (Tab 6) [NAB.005.827.0002].

[130] Exhibit 5.44, Witness statement of Nicole Smith, 3 August 2018, Exhibit NSS-2 (Tab 8) [NAB.005.827.0006].

[131] Exhibit 5.44, Witness statement of Nicole Smith, 3 August 2018, Exhibit NSS-2 (Tab 8) [NAB.005.827.0006].

[132] Transcript, Nicole Smith, 7 August 2018, 4311.

[133] Transcript, Nicole Smith, 7 August 2018, 4311.

[134] Exhibit 5.43, Witness statement of Nicole Smith, 1 August 2018, 6 [21].

[135] Transcript, Paul Carter, 6 August 2018, 4210; Transcript, Nicole Smith, 7 August 2018, 43867.

[136] Exhibit 5.7, 10 June 2016, Board Papers MLC Nominees, NULIS and PFS Nominees, 21.

[137] Exhibit 5.7, 10 June 2016, Board Papers MLC Nominees, NULIS and PFS Nominees, 22.

[138] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 20.

[139] Transcript, Nicole Smith, 8 August 2018, 4387.

[140] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 20.

[141] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 20.

[142] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 20.

[143] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 23.

[144] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 20.

[145] Transcript, Nicole Smith, 8 August 2018, 4391.

[146] Transcript, Paul Carter, 6 August 2018, 4217, 4219.

[147] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 6.

[148] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 5.

[149] Transcript, Paul Carter, 6 August 2018, 4220.

[150] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 67.

[151] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 67.

[152] Transcript, Paul Carter, 6 August 2018, 4216.

[153] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 4.

[154] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 3.

[155] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, Appendix 4.

[156] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 49.

[157] Exhibit 5.7, 10 June 2016, Board Papers, MLC Nominees, NULIS and PFS Nominees, 56; Transcript, Peter Kell, 17 August 2018, 5256.

[158] Transcript, Nicole Smith, 8 August 2018, 4398.

[159] Transcript, Nicole Smith, 8 August 2018, 4400.

[160] Transcript, Nicole Smith, 8 August 2018, 4405.

[161] Transcript, Nicole Smith, 8 August 2018, 4404.

[162] Transcript, Nicole Smith, 8 August 2018, 4404.

[163] Transcript, Nicole Smith, 8 August 2018, 4404.

[164] Transcript, Nicole Smith, 8 August 2018, 4404.

[165] Transcript, Nicole Smith, 8 August 2018, 4400.

[166] Transcript, Nicole Smith, 8 August 2018, 4401.

[167] Transcript, Nicole Smith, 8 August 2018, 4401.

[168] SIS Act s 29VN(b).

[169] Transcript, Nicole Smith, 8 August 2018, 4406.

[170] Transcript, Nicole Smith, 8 August 2018, 4406.

[171] Transcript, Nicole Smith, 8 August 2018, 4407.

[172] Transcript, Nicole Smith, 8 August 2018, 4409.

[173] Exhibit 5.58, 22 August 2017, Minute of NULIS Nominees, 22 August ‘17 and JANA, June17 Quarterly Investment Report.

[174] Transcript, Nicole Smith, 8 August 2018, 4417.

[175] Transcript, Nicole Smith, 8 August 2018, 4422.

[176] Transcript, Nicole Smith, 8 August 2018, 4423.

[177] Transcript, Nicole Smith, 8 August 2018, 4422–3.

[178] Transcript, Nicole Smith, 8 August 2018, 4406.

[179] Transcript, Nicole Smith, 8 August 2018, 4407.

[180] Transcript, Nicole Smith, 8 August 2018, 4420.

[181] Transcript, Nicole Smith, 8 August 2018, 4422.

[182] Transcript, Nicole Smith, 8 August 2018, 4422.

81 thoughts on “1.2 Evidence”

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