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
-
Is it a debt? – legal test and creditors’ statutory demands
This article examines a Court decision that could have a significant impact on creditors making statutory demands. Learn more about the case of Matrix Group Co Pty Ltd [2021] NSWSC 1042, and the implications for creditors, as well as relevant legislation and case law.
-
Director identification numbers now a reality
The Federal Government has passed a law requiring all directors to obtain a Director Identification Number (DIN). Learn more about the implications of this law, including the potential penalties for non-compliance.
-
Present entitlement in trusts – what it means
Explore the High Court’s interpretation of “present entitlement” under the Income Tax Assessment Act 1936 (Cth). Learn when a person has a vested interest in trust assets and how the trustee’s discretion affects the beneficiary’s entitlement.
-
What exactly is a franked dividend?
Discover how dividend imputation works and how the amount of tax you owe on dividends can be affected by your marginal tax rate and the company tax rate. Learn about the different types of franked dividends, such as fully franked and partially franked, and how they can impact your finances.
-
Do I have an implied licence for software?
This article examines the implications of a Federal Court case, which awarded over $1.1 million in damages for unlicensed software use. Learn more about the decision and key principles for software licencing that businesses should consider.
-
The Modern Slavery Act 2018 (Cth) – explained
Australian businesses with annual consolidated revenue of AUD$100 million or more must now file a Modern Slavery Statement to the government’s online register, addressing modern slavery risks and due diligence/remediation processes. Lower revenue entities can also file voluntarily.
-
What are exclusive supply contracts?
The Court must consider whether the applicant has no other effective remedy, and if the information is sought for criminal proceedings, that there is a reasonable potential it will lead to conviction.
-
Shareholder oppression – a taxonomy of corporate wrongs
This article examines the concept of shareholder oppression and provides examples of when the Court has found oppressive conduct, as well as when it has not. It also outlines the remedies the Court prefers when faced with oppressive conduct.
-
Changes for casual employment – employer’s responsibilites
The Fair Work Amendment Act 2021 (Cth) has changed the landscape of employment for casual employees. Employers need to be aware of the amended definition of casual employees, the “casual conversion” option and the requirement to provide a Casual Employment Information Statement (CEIS).
