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ASIC threatens big banks with criminal charges

Kell ASIC
Peter Kell said ASIC will launch legal action soon. Photo:AAP
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ASIC is considering criminal charges over the fee-for-no-service issues aired at the financial services royal commission with its deputy chair Peter Kell telling Commissioner Kenneth Hayne that the regulator was giving the matter consideration.

“Has ASIC … given consideration to submitting a brief to Commonwealth DPP [Director of Public Prosecutions] in respect of any aspect of the fees for no service matter?” the commisioner asked.

“Yes,” Mr Kell replied, telling the commission that both criminal and civil prosecutions were under consideration.

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

He did not detail which organisations were likely to be in the firing line.

However he did go into detail on ASIC’s dealings with NAB over the bank’s deliberate refusal to tell the regulator full details of its fee-for-no-service breaches prior to the bank releasing its annual profit in October 2016.

The bank told ASIC the full details of its law breaking two weeks later at a meeting. Notes from the meeting describe the regulator’s shock at what emerged.

“Today’s update radically revises the previous compensation estimates to a total of $34 million, including interest.

“The revised figure is concerning because the bank has known about the events for approximately 11 months and has only just presented the figure in a meeting.

“We are questioning whether the imposition of license conditions is enough  in this instance.”

Despite that, ASIC did impose license conditions on NAB after the bank negotiated an outcome.

ASIC commented on its stance in another internal memo: “We note that NAB Wealth’s letter is unusual because they are effectively letting us know what they plan to do and are testing whether we have concerns.

“We also note that Nab may consider our response unhelpful.”

Some of NAB’s legal breaches were around charging grandfathered commissions on products following the banning of the practice from 2014.

Mr Kell told counsel assisting Michael Hodge QC the regulator believed grandfathered commissions were not good for the consumer. However ASIC had not challenged NAB’s decision to allow the practice to continue while legal.

“Rather than taking any steps to investigate this issue and bring a proceeding to determine the law ASIC didn’t do anything,” Mr Hodge said.

Mr Kell said the regulator had given consideration to taking action but had not as it was legally very difficult.

Mr Kell said later that he would like to see grandfathered commissions scrapped.

“I think, with the benefit of hindsight, we should have considered that issue, and we should have raised it with APRA as well,and it’s an issue which I would say that we will consider; we should have considered it, and we will consider it.”

In his final summation of the two weeks of hearings on superannuation Mr Hodge described grandfathered commissions as “an area of concern”.

Mr Kell said ASIC needed more powers to deal with corporate crime. However the Commissioner intervened and questioned him about the fact that ASIC had made very little use of legal sanctions at its disposal currently.

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