NAB makes Corrective Disclosure to Customers after ASIC Investigation

Tuesday 18 July 2017 @ 9.32 a.m. | Legal Research | Trade & Commerce

An Australian Securities and Investments Commission (ASIC) investigation of a number of advice licensees within the National Australia Bank Group (NAB Group), for failing to disclose relationships between advisers, advice licensees, and other members of the NAB Group that issue investment products, has resulted in corrective disclosure being made to customers.

The non-disclosure occurred when customers were advised to acquire products issued by NAB Group-related firms, including MLC-branded products. Customers were provided with Statements of Advice (SoAs) and Financial Services Guides (FSGs) by their financial advisers that did not fully disclose the connection between each customer's adviser, the advice licensee, and recommended investments.

Disclosing associations or relationships between advisers, employers, authorising licensees and issuers of financial products to customers in FSGs and SoAs is required under the Corporations Act 2001 (Cth) (the Act).

Background

The outcome is a result of ASIC's Wealth Management Project (the Project) which was established in October 2014 with the objective of lifting standards by major financial advice providers. The Project focuses on the conduct of the largest financial advice firms (NAB, Westpac, CBA, ANZ, Macquarie and AMP).

ASIC's work in the Project covers a number of areas including:

  • working with the largest financial advice firms to address the identification and remediation of non-compliant advice; and
  • seeking regulatory outcomes, where appropriate, against licensees and advisers.

The Investigation

At least 150,000 customers received deficient disclosure either in SoAs or FSGs in relation to MLC-branded products and boutique investment manager products. The defective disclosure occurred following a failure to update template documents due to a process error.

The licensees investigated by ASIC were National Australia Bank Limited, Godfrey Pembroke Limited, Apogee Financial Planning Limited, GWM Adviser Services Limited, Meritum Financial Group Pty Ltd and JBWere Limited.

The Outcome

Following discussions between ASIC and the NAB Group, customers who invested in MLC-branded products will receive corrective disclosure when they log in to their accounts on the MLC website for a three month period. NAB has also agreed to write to the remainder of affected customers currently invested in related products, explicitly acknowledging the issue and providing corrective disclosure.

NAB has since apologised for the omission and committed to remedial action. ASIC said clients who log in to view MLC investment products would see a disclosure and others would receive corrected disclosure letters.

Separately, ASIC has also aired its concerns around accountants inappropriately providing “sophisticated investor” certificates to retail investors. Companies raising money by offering shares to retail investors are required to give the investors sufficient information via the provision of a prospectus or other regulated disclosure documents, helping them to make a decision as to whether they should invest in the company.  It also serves as a key protection for “retail investors" under the Act.

ASIC said it is aware of instances in which accountants have facilitated retail investors acquiring shares offered by a company without adequate or any disclosure, citing recent fundraisings where some accountants used trust or company structures that claim to allow clients who are not “sophisticated investors” to purchase shares without the required prospectus or other disclosure document.

Statement from NAB

In a statement, NAB Executive General Manager of Wealth Advice, Greg Miller, said a simplification of documentation was to blame:

“For some years now, NAB has been on a journey of simplification, seeking to make things easier for our customers and to provide more investment options for them. Unfortunately we did not execute some of these changes well. While simplifying some of the documentation that we send customers, and while expanding our range of investments, we omitted disclosures that are important for our customers to receive. We apologise to our customers, and want to assure them that they did not impact the quality of advice they received from their adviser, and there is no impact on their investments or portfolios. Since identifying and notifying ASIC of these errors, we have worked to correct them, and to improve our processes to try to ensure they do not happen again. We are committed to transparency and have contacted, advised, and corrected information for customers via mail and the MLC website. Customers with further concerns can contact NAB’s dedicated hotline on 1800 035 687.”

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Sources:

ASIC calls on NAB to improve disclosure – financialstandard.com.au

NAB makes corrective disclosure to customers about relationships within its wealth management business – ASIC Media Release 17-229MR

ASIC calls NAB licensees on poor disclosure – professionalplanner.com.au

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