Financial Services Reform Act 2001 (122 of 2001)

Schedule 1   Financial Services and Markets

Part 1   Main amendments

Corporations Act 2001

1   Chapter 7 - Part 7.6 - Division 6

Division 6 - Liability of financial services licensees for representatives

917A Application of Division

(1) This Division applies to any conduct of a representative of a financial services licensee:

(a) that relates to the provision of a financial service; and

(b) on which a third person (the client ) could reasonably be expected to rely; and

(c) on which the client in fact relied in good faith.

(2) In this Division, a reference to a representative’s conduct being within authority in relation to a particular financial services licensee is, subject to subsection (3), a reference to:

(a) if the representative is an employee of the licensee or of a related body corporate of the licensee - conduct being within the scope of the employee’s employment; or

(b) if the representative is a director of the licensee or of a related body corporate of the licensee - conduct being within the scope of the director’s duties as director; or

(c) in any other case - conduct being within the scope of the authority given by the licensee.

(3) If:

(a) a person is the representative of more than one financial services licensee in respect of a particular class of financial service; and

(b) the person engages in conduct relating to that class of service; and

(c) any one or more of the licensees issues or transfers a financial product as a result of the conduct;

then, for the purposes of this Division:

(d) the person is taken, in respect of the conduct, to have acted within authority in relation to the licensee or to each licensee who issued or transferred a financial product as a result of the conduct; and

(e) the person is, in respect of the conduct, taken not to have acted within authority in relation to any licensee who did not issue or transfer a financial product as a result of the conduct.

917B Responsibility if representative of only one licensee

If the representative is the representative of only one financial services licensee, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative’s conduct is within authority.

917C Representatives of multiple licensees

(1) This section applies if the representative is the representative of more than one financial services licensee.

Financial service covered by only one authority

(2) If:

(a) the representative is the representative of one of the licensees only in respect of a particular class of financial service; and

(b) the conduct relates to that class of service;

that licensee is responsible for the conduct, as between that licensee and the client, whether or not the conduct is within authority.

Financial service covered by multiple authorities: conduct within authority for one or more of them

(3) If:

(a) the representative is the representative of more than one of the licensees in respect of a particular class of financial service; and

(b) the conduct relates to that class of service; and

(c) the conduct is within authority in relation to:

(i) only one of those licensees (the authorising licensee ); or

(ii) two or more of those licensees (the authorising licensees );

then:

(d) if subparagraph (c)(i) applies - the authorising licensee is responsible for the conduct, as between that licensee and the client; or

(e) if subparagraph (c)(ii) applies - the authorising licensees are jointly and severally responsible for the conduct, as between themselves and the client.

All other cases

(4) In any other case, all of the licensees are jointly and severally responsible for the conduct, as between themselves and the client, whether or not the representative’s conduct is within authority in relation to any of them.

917D Exception if lack of authority is disclosed to client

A financial services licensee is not responsible under section 917B or 917C for the conduct of their representative if:

(a) the conduct is not within authority in relation to the licensee (or in relation to any of the licensees, if there were more than one); and

(b) the representative disclosed that fact to the client before the client relied on the conduct; and

(c) the clarity and the prominence of the disclosure was such as a person would reasonably require for the purpose of deciding whether to acquire the relevant financial service.

Note: A person must not hold out that conduct, or proposed conduct, of the person is within authority in relation to a particular financial services licensee, unless that is the case. See section 911C.

917E Responsibility extends to loss or damage suffered by client

The responsibility of a financial services licensee under this Division extends so as to make the licensee liable to the client in respect of any loss or damage suffered by the client as a result of the representative’s conduct.

917F Effect of Division

(1) If a financial services licensee is responsible for the conduct of their representative under this Division, the client has the same remedies against the licensee that the client has against the representative.

(2) The licensee and the representative (along with any other licensees who are also responsible) are all jointly and severally liable to the client in respect of those remedies.

(3) However, nothing in this Division imposes:

(a) any criminal responsibility; or

(b) any civil liability under a provision of this Act apart from this Division;

on a financial services licensee that would not otherwise be imposed on the licensee.

(4) This Division does not relieve a representative of a financial services licensee of any liability they have to the client or the licensee.

(5) An agreement is void in so far as it purports to alter or restrict the operation of section 917B, 917C, 917D or 917E.

(6) However, subsection (5) does not apply to the extent that the agreement:

(a) provides for a representative of a financial services licensee to indemnify the licensee for a liability of the licensee in respect of the representative; or

(b) provides for a financial services licensee, for whom a representative acts, to indemnify another financial services licensee for a liability in respect of the representative.

(7) A financial services licensee must not make, or offer to make, an agreement that is, or would be, void under subsection (5).