Personal Financial Advice – A Lesson For Investors
21.07.22BACKGROUND
In the High Court case of Westpac Securities Administration Ltd v ASIC [2021] HCA 3 (‘Westpac v ASIC’), the High Court clarified the legal test for providing personal financial advice. The High Court unanimously upheld the Full Federal Court’s decision that Westpac had provided ‘personal advice’ to its customers, in breach of its Australian Financial Services License (‘AFSL’) and section 766B(3)(b) of the Corporations Act 2001 (Cth) (‘Act’).
The AFSL, granted under section 913B of the Act, allows Westpac to provide financial services, financial product advice, albeit the AFSL does not provide Westpac with an ability to engage in or provide personal financial advice.
Section 766B(3)(b) of the Corporations Act 2001 (Cth) defines ‘personal advice’ to include ‘financial product advice that is given or directed to a person (including by electronic means) where:
- the provider of the advice has considered one or more of the person’s objectives, financial situation and needs; or
- a reasonable person might expect the provider to have considered one or more of those matters’.
THE ADVICE
During a “Superannuation Activation Team” campaign (‘Campaign’), Westpac contacted its existing clients, customers and members (collectively, ‘Clients’) with the intention of enticing the Clients to combine any external superannuation accounts with their pre-existing Westpac superannuation account, such that monies from third party superannuation funds (once located) would roll over into their Westpac account. The Campaign was structured with a view to providing general advice (and not personal financial advice) to the Clients.
The issue arises in circumstances where Westpac, as a financial services provider with an AFSL, would be taken to be providing personal financial advice, regardless of the intention to provide general advice in any event.
At trial, Westpac conceded that it provided financial product advice to the Clients within the meaning of 766A(1)(a) of the Act. The issue on appeal was whether Westpac’s advice amounted to ‘personal advice’ within the meaning of section 766B(3)(b) of the Act (detailed above).
It was found that Westpac not only breached the conditions of the AFSL, but also failed to do all things necessary to ensure that the financial services covered by the AFSL were provided efficiently, honestly and fairly. By telephoning the Clients for the purposes of the Campaign, the High Court ultimately found that:
‘… in all the circumstances, the financial product advice Westpac gave to its members was personal advice within the meaning of section 766B(3)(b) of the Corporations Act.’
KEY TAKEAWAYS
If you been involved in a failed investment, contact our firm’s litigation and dispute resolution team to discuss your rights, and potential avenues of recovery.
Businesses should otherwise carefully review their operations to ensure that they are not in breach of any statute, agreement, licence or other arrangement. You can read more on our website by clicking the following link.
OUR ROLE IN LITIGATION AND YOUR BUSINESSES SUCCESS
If you are looking to seek legal advice, Ramsden Lawyers are able to assist you. We are happy to arrange an initial consultation to assist you in navigating the procedures set out under the relevant legislation for your circumstances. We have a litigation team to assist in any proceedings you wish to commence or defend, and a business team to assist you in understanding your obligations under relevant law.
The content of this article is intended to provide a general guide to the subject matter and must not be relied on as legal advice. Specific advice should be sought about your circumstances.
For further all things litigation and business at Ramsden Lawyers please follow this link.