Two wealth management businesses in the big bank charged $105 millon of fees without providing any service in return.
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The Federal Court has ordered two wealth management businesses in National Australia Bank Ltd (ASX: NAB) to pay $57.5 million penalties.
The court found MLC Nominees and NULIS had contravened fees-for-no-service laws.
The breaches included making false and misleading communications to superannuation members about how the bank charges fees and when the clients are obliged to pay it.
The NAB businesses were also found to have failed to ensure their services were provided “efficiently, honestly and fairly”.
MLC Nominees will pay a $49.5 million penalty while NULIS was fined $8 million.
The Motley Fool has contacted NAB for comment.
Biggest ever penalty
The massive penalty is the largest ever imposed in a case started by the Australian Securities and Investments Commission (ASIC).
“Fees-for-no-service conduct is particularly egregious, having resulted in substantial financial loss for thousands of unsuspecting consumers,” said ASIC deputy chair Daniel Crennan QC.
“The penalty imposed by the court reflects the very serious contraventions by MLC Nominees and NULIS.”
MLC Nominees and NULIS both admitted liability, with the judge taking the confession into account in determining the fine.
How much were clients ripped off?
MLC Nominees grabbed $33.6 million in fees from about 220,000 members of MasterKey Business Super and MasterKey Personal Super who didn’t even have a financial advisor.
This went on for almost 4 years between 2012 and 2016.
MLC Nominees and NULIS also deducted about $71.9 million in fees off roughly 457,000 MasterKey Personal Super customers who did have an advisor but received no service.
That money spinner endured for more than 6 years from 2012 to 2018.
Justice Yates described the breaches as “very serious” and set the fines to match the large scale of the businesses.
The legal action started in September 2018, before the Royal Commission into the finance industry had started. However, NULIS’ behaviour was a case study during the famous enquiry.
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