Whilst the financial services sector seems to have embraced the innovation economy, a recent case shows just how important it is for Australian Financial Services Licence, (AFS) holders to take care when advertising their products.
A recent case brought by the Australian Securities and Investments Commission, (ASIC) is a reminder that when advertising investment schemes precise language needs to be used.
‘ASIC Approved’
Recently Huntley Management Limited, (Huntley), an AFS holder and responsible entity of managed investment schemes, came under fire from ASIC.
Huntley’s had stated on their website and later in a newspaper, that they acted “as responsible entity, custodian, trustee and/or manager for over 40 managed investment projects approved by the Australian Securities and Investments Commission’. ASIC brought a civil penalties claim in the Federal Court of Australia for the use of the words, “approved by ASIC”. ASIC claimed it was a breach of s12DB (1)(e) of the Australian Securities and Investments Commission Act. This section states that a person must not:
“make a false or misleading representation that services have sponsorship, approval, performance characteristics, uses or benefits”.
Huntley faced a fine of up to $3 Million, however pleaded guilty and settled with ASIC by agreeing to pay a fine of $20,000. The lesson here is that even apparently minor misstatements can have significant consequences.
ASIC is the body tasked with registration of managed investment schemes and the issuance of Australian Financial Securities Licences. However, it has made it clear that this in no way means that they approve the contents of the scheme or any financial product that has been issued by a licence holder; and to claim otherwise may be misleading and deceptive.
ASIC provides to the financial services industry the Regulatory Guide 234 Advertising Financial Products and Services (including credit): Good Practice Guidance as a guideline for financial suppliers to meet the requirements and their obligations under the act.
Links and further references
Legislation
Australian Securities and Investments Commission Act 2001 (Cth)
Competition and Consumer Act 2010 (Cth)
Cases
Further information about misleading and deceptive conduct
If you need advice on misleading and deceptive conduct or avoiding liability for misstatements, please contact me for a confidential and obligation free and discussion:
Malcolm Burrows B.Bus.,MBA.,LL.B.,LL.M.,MQLS.
Legal Practice Director
T: +61 7 3221 0013 (preferred)
M: +61 419 726 535
E: mburrows@dundaslawyers.com.au
Disclaimer
This article contains general commentary only. You should not rely on the commentary as legal advice. Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.
Related insights about misleading and deceptive conduct
-
Federal Court rules on unfair contract clauses
This case serves as a reminder to businesses and consumers to review their contracts and ensure they are compliant with the Australian Consumer Law (ACL). Find out more about the Federal Court ruling and what it means for businesses and consumers.
-
Value shifting in commercial transactions explained
Value shifting is an important tax consideration in Australia. This article outlines the general regime and exemptions, as well as Australian Taxation Office (ATO) resources for guidance.
-
Can a third party be held accountable for breaching director duties?
This article examines how the Corporations Act 2001 (Cth) holds third parties “knowingly involved” in director misconduct accountable. Learn more about the tests, cases, and damages that can result from company business gone wrong.
-
Preventing ex-employees from using your client list
This article examines a Federal Court of Australia decision to grant an interlocutory injunction against a former employee. Learn how the Court reached its decision, what businesses can take away from the case, and find out how to protect your business from similar breaches.
-
Holding company responsibility for subsidiary debts
Uncover the factors that affect a holding company’s liability for its subsidiary’s debts. Learn when a holding company can be liable and what defences are available to protect it.
-
ASIC v Macdonald – have the lessons really been forgotten?
The case of Australian Securities and Investments Commission v Macdonald (No 11) [2009] NSWSC 287 highlights the importance of properly documenting Directors’ meetings to ensure they are legally compliant. This article examines the facts of the case, the basis of The Australian Securities and Investments Commission’s argument, and the principles of preparing minutes of Directors’…
-
The Crowd-sourced Funding Bill 2016 – overview
Revised from the 2015 Bill, the 2016 Bill provides a regulatory framework for Crowd Sourced Funding (CSF) with eligibility requirements, obligations for Intermediaries facilitating the CSF Offers, and restrictions on advertising to protect retail investors.
-
Shadow directors and de facto directors explained
This article examines the legal reality of de facto directors and shadow directors, which go beyond those validly appointed. It also considers whether advisory board members can be classed as such, and the implications of this status, with reference to relevant case law.
-
Refund obligations for Australian businesses
In Australia, the main piece of legislation governing the supply of goods and services is the Competition and Consumer Act 2010 (Cth) (CCA), which incorporates the Australian Consumer Law (ACL) in Schedule 2. These obligations apply in addition to the terms and conditions by which a business trades. The CCA regulates the interaction between businesses…
