The class action, which was filed in the Supreme Court of Victoria, seeks to recover losses as a result of an alleged failure to disclose the bank's exposure to US toxic debt during 2008.

Maurice Blackburn principal lawyer Andrew Watson, who is leading the class action, said 250 institutional and retail investors have already signed up for the action, which involves claims in the vicinity of $450 million.

Maurice Blackburn said it was first contacted by shareholders following a $6 per share plunge in the bank's share price in July 2008. 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.

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

"We will 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. Shareholders who bought shares before NAB revealed its true position suffered losses as a result," said Watson.

"In early May 2008, the NAB told the market that it had provisioned $181 million in respect of its $1.2 billion CDO exposure. The bank announced at the same time that this was a very conservative provision. Investors took comfort form this apparently conservative and appropriate approach," he said.

But only two months later, Watson claimed NAB increased its total provision to $1.1 billion or 90 per cent of the value of the CDOs.

"In the following days, NAB's share price plunged nearly $6 and analysts complained strongly about the misleading nature of NAB's earlier announcement," he said.

The action is being funded by International Litigation Funding Partners.