Supreme Court orders widening of NAB toxic debt class action

3 September 2012
Thousands of investors in one of Australia's biggest banks are today being issued with a fresh invitation to join a shareholder class action currently being run by law firm Maurice Blackburn.

The Supreme Court of Victoria has ordered the publication of notices in national newspapers today (3 September 2012) to open the class action to

all investors who held shares in the National Australia Bank between 1 January and 25 July 2008.

In July 2008 NAB suffered the biggest drop in its share price since 1987 when the bank revealed it had lost up to $1b in the US mortgage crisis.

The court has also directed NAB write to 230,000 shareholders advising them of the opportunity to join the class action. Those wishing to join must do so by 12 October 2012.

Jacob Varghese, principal lawyer on the class action said: "We allege that between 1 January 2008 and 25 July 2008 NAB did not properly disclose to shareholders and potential shareholders all material information relating to its CDO exposure."

"Thousands of investors who bought shares in that period were, we say, misled and suffered losses as a result." said Mr Varghese.

"The bank, like any listed company has an obligation under the Corporations Act to tell the ASX about any information it has which would have an impact on its share price. Investors must be able to make informed decisions about where they choose to buy shares."

Two hundred and fifty institutional and retail investors are currently group members in the class action which was first mooted in July 2008 when concerned investors contacted Maurice Blackburn. Court proceedings were launched in November 2010. The matter is scheduled for Trial in December.

NAB had bought $1.2 billion in Collaterised Debt Obligations (CDOs) in 2006 which comprised asset-backed securities, in particular US residential mortgage backed securities.

These CDOs had a heavy exposure to the sub prime residential mortgage market which became "toxic debt" in 2007 and early 2008.

"In early May 2008, the National Australia Bank told the market that it had provisioned $181 million in respect of its $1.2 billion CDO exposure.

At that time, the bank led investors to believe that $181 million was a very conservative provision."

"But in July 2008, only two months later, NAB increased its total provision to $1.1 billion, or 90% of the value of the CDO's. In the following days NAB's share price plunged by nearly $6."

Advertisements advise investors that if they take no action by 12 October 2012 they may lose any rights to take action to recover losses at any future date.

Alert hearing

The next hearing in the class action is on 4 September in the Victorian Supreme Court at 10am, before Justice Pagone.

Read past press release on the NAB Class Action.

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