'Criminal?' - Hayne's bombshell question over fees for no service
The prospect that the fees-for-no-service scandal rocking the banking and wealth industries could lead to criminal action has been raised at the financial services royal commission.
During questioning of Nicole Smith, former chairwoman of NAB's superannuation trustee Nulis Nominees, commissioner Kenneth Hayne asked whether NAB's conduct in the matter raised a question of the criminal law.
"[Was there] any contemplation of a criminal proceeding? Ever?" Mr Hayne said.
Ms Smith said that was not contemplated, prompting Mr Hayne to ask: "Did you think yourself that taking money to which there was no entitlement raised a question for criminal law?"
Ms Smith replied that she did not.
The bombshell question came the day after the corporate watchdog said compensation to customers over the fees for the no-service rort had reached more than $220 million and was likely to stretch to $850 million.
The commission has previously flagged the possibility of criminal action over AMP's response to the fees-for-no-service issue over accusations it broke laws when it misled the regulator.
Ms Smith also denied the bank had "got off lightly" over a fees-for-no-service breach in its superannuation arm, and that its dealings on the matter were "hopelessly conflicted".
Counsel assisting Michael Hodge, QC, on Wednesday continued to question Ms Smith over internal decision making around the potential need to repay advice fees charged to super fund members who were not actually linked to an adviser.
The commission had previously heard that the market regulator, the Australian Securities and Investments Commission (ASIC), in 2016 had flagged slapping Nulis with an enforceable undertaking (EU) over the breach, a move that - according to evidence tendered to the royal commission - NAB strongly resisted in meetings and in correspondence with the regulator.
ASIC eventually decided against an EU, instead taking the less serious step of imposing extra conditions on Nulis' financial services licence.
Mr Hodge on Wednesday questioned Ms Smith over discussions within NAB over the potential EU, including fears about the "adverse publicity" that would flow from such a move.
"Was there a discussion that you can recall about differences in adverse publicity depending upon whether an EU or a change to licence conditions occurred?" he asked Ms Smith.
"Yes," she replied.
Mr Hodge then asked whether Ms Smith recalled "that the effect of the discussion was that there would be less adverse publicity if there was a change of licence conditions rather than enforceable undertaking" to which she replied: "Yes."
But Ms Smith had earlier rejected Mr Hodge's question on whether Nulis and NAB's wealth business regarded themselves as "getting off lightly" over the breach. Ms Smith argued that either an EU or extra licence conditions "essentially they meant we would do exactly the same thing".
How can (NAB) advise you about what should be done ... if it’s the one that has taken the money and will have to pay it back
Counsel assisting the commission Michael Hodge
The commission has been examining the relationship between NAB wealth's super fund administrator, and NAB's superannuation trustee, Nulis, including internal discussions whether the fees in question should be repaid. It has also examined how the breach was presented to regulators ASIC and APRA.
Mr Hodge questioned whether NAB's handling of the issue was "hopelessly conflicted".
"How can [NAB's wealth division] advise you about what should be done or make recommendations to you about what should be done if it's the one that has taken the money and will have to pay it back?" Mr Hodge asked.
Later, Ms Smith acknowledged that, while the administrator management was "in a conflicted position, I do not believe it is hopelessly conflicted".
Ms Smith, under questioning, maintained that the trustee had acted in the best interests of super fund members over the breach, because they were eventually "fully compensated".
Ms Smith had previously acknowledged that she believed the members should be repaid the fees, but had also acknowledged that decisions to remediate had taken too long in two instances.
The hearing continues, with Australian Super chief executive Ian Silk expected to take the stand later on Wednesday.