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
-
Just and equitable winding up – shareholder oppression
Discontinuing proceedings in the Federal Court of Australia can be costly, as the default position is that the discontinuing party pays the other party’s costs. However, the Court has discretion to award costs and may consider the parties’ conduct and reasons for discontinuance.
-
Force majeure clauses tested by pandemic
Explore how COVID-19 may affect contractual obligations through an in-depth look at the legal concept of force majeure. Learn about the elements, nuances, requirements, and insurance implications of this technical area of contract law.
-
Marketplace terms and conditions – legal issues
This article explores essential terms and considerations for building marketplace terms and conditions, including establishing the position of the platform operator, user accounts, payment options, intellectual property, disclaimers, liability, indemnities, and the Australian Consumer Law.
-
Standard form IT procurement contracts – legal issues
Do you know what to look for in an IT procurement agreement? Learn more about the Queensland government QITC framework and key areas to consider when drafting or negotiating an agreement to protect your company’s commercial value.
-
Director’s identification numbers to become a reality
On 12 June 2020, the Treasury Laws Amendment (Registries Modernisation and Other Measures) Act 2020 introduced the requirement for all Australian company directors to have a “Director Identification Number” (DIN). The DIN will become a single identifier for each director across all of their office holdings with the true identity of each director is verified…
-
What exactly is a section 293 direction?
There are several reasons why a shareholder may require financial information, primarily they are denied access to the ‘accounts’ so as to make informed decision about the company. The Corporations Act 2001 (Cth) (Act) provides various mechanisms for shareholders to obtain financial and accounting information about a company, to allow them to access full and…
-
Director’s misuse of funds held to be oppressive
This article explores shareholder oppression, examining Section 232 of the Corporations Act 2001 (Cth) and Martin v Australian Squash Club Pty Ltd (1996) 14 ACLC 452, to understand the cumulative effect of individual acts.
-
Electronic document execution by directors
The Federal Government has issued a ruling allowing companies to sign documents electronically until 6 November 2020. Find out more about how this ruling affects your business.
-
Arbitration clauses in building disputes
The QCAT decision of 4D Electrical Qld v Greyburn Pty Ltd [2020] QCAT 74 shows arbitration can be a more efficient alternative to Court/tribunal litigation. Courts uphold contractual obligations agreed to by parties, proving arbitration is a viable option.
