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
-
Should a lawyer be the Lead Consultant?
Discover the role of a Lead Consultant in a business acquisition process and the qualities needed for success. Gain insight from case studies and find out the legal advice you should obtain for your own situation.
-
Working with an Expert Adviser
Expert advisors may be consulted for business acquisitions, including IT consultants, industry experts, insurance brokers, scientists, lawyers, and patent attorneys. Advisory team must understand role, scope of work, and due date for successful work.
-
Pre-acquisition planning – shares or assets?
Planning a business acquisition? Consider structure, ownership, securities, contract and assets. Generally, asset purchase or security acquisition? Don’t forget to factor in the Target’s wishes.
-
Selecting a business valuation methodology
Are you considering a business acquisition? Learn three methods of valuation and which are best for businesses with high asset values, those that are not profitable, and those valued on a going concern basis. Read this article from RSM Bird Cameron Chartered Accountants to find out more.
-
Should you work in the industry before you buy?
Are you considering a business acquisition? Learn how working in the business can help verify takings and the importance of a tuition period in the Real Estate Institute of Queensland (REIQ) Business Sale Contract. Click through to find out more.
-
How to identify fraudulent workers’ comp claims
Learn how to identify and prevent Worker’s Compensation fraud with this article. Employees found guilty of fraud face criminal convictions, fines up to $55,000 and a max of five (5) years imprisonment.
-
Electronic service of legal documents
The decision in Conveyor & General Engineering Pty Ltd v Basetec Services Pty Ltd [2014] QSC 30 examined validity of service of documents via email and Dropbox. Find out judgement and “take-aways” to help navigate complex legal process of document service.
-
Shareholders’ agreements and inconsistency clauses explained
When shareholders are restricted from accessing company information, it may be a sign of a dispute. The Corporations Act 2001 (Cth) provides mechanisms for minority shareholders to obtain relevant information, but they must prove they are acting in ‘good faith’ and ‘for a proper purpose’.
-
ACCC v Coles Supermarkets Australia Pty Ltd [2014] FCA 634
In Australian Competition and Consumer Commission v Coles Supermarkets Australia Pty Limited [2014] FCA 634, Coles has been accused of misleading customers over their partially-baked bread. Learn more, including the obiter suggested by Allsop CJ, by clicking through to the article.
