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
-
Greenwashing on Facebook – ASIC fines Future Super
Learn more about Greenwashing in Australia and the alleged incidents, with Australian Securities and Investments Commission (ASIC) and the Australian Competition and Consumer Commission (ACCC) responsible for regulating misconduct. ASIC issued an infringement notice to Future Super for making misleading Greenwashing claims on Facebook. Understand the legislative framework and how to avoid making false claims.
-
Australian legislation tackles loot boxes in video games
The Classification (Publications, Films and Computer Games) Amendment (Loot Boxes) Bill 2022 (Bill) has been tabled in the House of Representatives on the 28 November 2022. The private member’s Bill acts in response to growing support for the regulation of features and elements within video games which appear to simulate gambling.
-
Consumer law updates business owners should know
The Treasury Laws Amendment (More Competition, Better Prices) Act 2022 (Cth) (Act) amends various pieces of legislation to provide stronger competition and consumer protections. In particular, the Act bolsters the penalties applicable for offences relating to unfair practices and unfair contract terms under as contained within the Competition and Consumer Act 2010 (Cth) (CCA) and…
-
Is a proposed settlement fair and reasonable in the Federal Court?
Class action lawsuits commonly resolve in a settlement between the members of a class and the respondents to a claim. However, there are strict requirements to proposed settlements, including that they are ‘fair and reasonable’, which will be subject to judicial oversight.
-
Resigning as director – when is it effective?
On 18 February 2021, the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020 (Cth) (Treasury Act) came into effect and introduced various measures to combat “phoenixing”. One of the reasons for this legislation was to help combat illegal phoenix activity which involves the creation of a new company to continue the business of an existing…
-
DIN update – deadline looms for Australian company directors
As 30 November 2022 approaches, Australian company directors must apply for a Director Identification Number (DIN) to comply with the Corporations Act 2001 (Cth) and the Corporations (Aboriginal and Torres Strait Islander) Act 2006 (Cth). Learn how to obtain your DIN, the application process and what documents you must provide.
-
Can contractors owe fiduciary duties to principals?
This article examines whether independent contractors owe fiduciary duties to their principal, as well as any additional statutory duties that may be imposed on independent contractors who are company directors.
-
Disputed debts in body corporate matters
This article examines the potential consequences of missing contribution levy payments in community titles schemes. It looks at specific cases and the risks associated with disputed body corporate debts, including the High Court decision of David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48.
-
Employee share scheme reforms from 1 October 2022
Changes to the Corporations Act 2001 (Cth) (CA) will reduce regulatory requirements and remove barriers for businesses to offer employee share schemes (ESS). This offers cash-poor businesses the potential to attract and retain employees who can benefit from ESS.
