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
-
Consumer transactions & The Competition and Consumer Act 2010 (Cth)
Businesses supplying goods or services to consumers or competitors must understand the Competition and Consumer Act 2010 (Cth) (CCA) to ensure they are compliant. Learn more about how to ensure fair treatment of customers and minimise risk of breaching the CCA.
-
Applying to set aside a creditor’s Statutory Demand for payment
Understand how to assess a genuine dispute in commercial contracts when served with a creditor’s Statutory Demand. This article explains the case law, provides links to relevant cases and references, and explains when to seek legal advice.
-
Understanding the legal issues of gamification
Gamification is a popular way to engage customers, but there are many legal issues to consider. This article looks at those issues and offers advice on how to get started.
-
Governance standards for not-for-profit organisations
Discover the full scope of the Australian Charities and Not-for-profits Commission Governance Standards and related topics. Learn how these standards provide a minimum level of assurance for charities to meet community expectations and ensure compliance with Australian law.
-
ACCC guide on business use of social media
The Australian Competition and Consumer Commission has released a guide for businesses engaging with customers on social media, covering response times, substantiating claims and offering refunds. The guide takes into account the size of businesses and amount of followers when determining response times.
-
What exactly is a Corporate Governance Framework?
Businesses need to ensure their advertising and marketing materials comply with the Australian Consumer Law (ACL). Our experienced team can provide advice on structuring promotions, drafting terms and conditions, and obtaining permits for competitions and games of chance, helping businesses avoid costly penalties from the Australian Competition and Consumer Commission (ACCC).
-
Director’s duty to prevent insolvent trading
This article provides an overview of directors’ duty to prevent insolvent trading under the Corporations Act 2001 (Cth), including the test for solvency, indicators of potential insolvency, and potential defences.
-
Shifts in criminal liability for company officers
The Personal Liability for Corporate Fault Reform Act 2012 (Cth) was implemented to ensure personal criminal liability for corporate fault is imposed in line with corporate governance principles, reducing risk and compliance issues for Company Officers.
-
Corporate governance as a strategic advantage
Good corporate governance is essential for any successful business. Learn how Directors and Senior Management can make it a priority, and how it can provide value and security to the business in today’s competitive global economy.
