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 11
Division 11 - Agreements with unlicensed persons relating to the provision of financial services
Subdivision A - Agreements affected
924A Agreements with certain unlicensed persons
(1) Subdivision B applies to an agreement entered into by a person (in this section and Subdivision B called the non-licensee ) and another person (in this section and Subdivision B called the client ) (not being a financial services licensee) that constitutes, or relates to, the provision of a financial service by the non-licensee if:
(a) the agreement is entered into in the course of a financial services business carried on by the non-licensee; and
(b) the non-licensee does not hold an Australian financial services licence covering the provision of the financial service, and is not exempt from the requirement to hold such a licence.
Note: It does not matter whether the financial service is provided to the client as a wholesale client or as a retail client.
(2) Subdivision B applies to the agreement whether or not anyone else is a party to the agreement.
Subdivision B - Effect on agreements
925A Client may give notice of rescission
(1) Subject to this section, the client may, whether before or after completion of the agreement, give to the non-licensee a written notice stating that the client wishes to rescind the agreement.
(2) The client may only give a notice under this section within a reasonable period after becoming aware of the facts entitling the client to give the notice.
(3) The client is not entitled to give a notice under this section if the client engages in conduct by engaging in which the client would, if the entitlement so to give a notice were a right to rescind the agreement for misrepresentation by the non-licensee, be taken to have affirmed the agreement.
(4) The client is not entitled to give a notice under this section if, within a reasonable period before the agreement was entered into, the non-licensee informed the client (whether or not in writing) that the non-licensee did not hold an Australian financial services licence.
(5) If, at a time when an Australian financial services licence held by the non-licensee was suspended, the non-licensee informed the client that the licence was suspended, the non-licensee is to be taken for the purposes of subsection (4) to have informed the client at that time that the non-licensee did not hold the licence.
(6) None of subsections (2), (3) and (4) limits the generality of either of the others.
(7) Subject to this section, the client may give a notice under this section whether or not:
(a) the notice will result under section 925B in rescission of the agreement; or
(b) the Court will, if the notice so results, be empowered to make a particular order, or any order at all, under section 925D.
925B Effect of notice under section 925A
A notice given under section 925A rescinds the agreement unless rescission of the agreement would prejudice a right, or an estate in property, acquired by a person (other than the non-licensee) in good faith, for valuable consideration and without notice of the facts entitling the client to give the notice.
925C Client may apply to Court for partial rescission
(1) If the client gives a notice under section 925A but the notice does not rescind the agreement because rescission of it would prejudice a right or estate of the kind referred to in section 925B, the client may, within a reasonable period after giving the notice, apply to the Court for an order under subsection (4) of this section.
(2) The Court may extend the period for making an application under subsection (1).
(3) If an application is made under subsection (1), the Court may make such orders expressed to have effect until the determination of the application as it would have power to make if the notice had rescinded the agreement under section 925B and the application were for orders under section 925D.
(4) On an application under subsection (1), the Court may make an order:
(a) varying the agreement in such a way as to put the client in the same position, as nearly as can be done without prejudicing such a right or estate acquired before the order is made, as if the agreement had not been entered into; and
(b) declaring the agreement to have had effect as so varied at and after the time when it was originally made.
(5) If the Court makes an order under subsection (4), the agreement is to be taken for the purposes of section 925D to have been rescinded under section 925B.
(6) An order under subsection (4) does not affect the application of section 925F or 925H in relation to the agreement as originally made or as varied by the order.
925D Court may make consequential orders
(1) Subject to subsection (2), on rescission of the agreement under section 925B, the Court, on the application of the client or the non-licensee, may make such order or orders as it would have power to make if the client had duly rescinded the agreement because of misrepresentation by the non-licensee.
(2) The Court is not empowered to make a particular order under subsection (1) if the order would prejudice a right, or an estate in property, acquired by a person (other than the non-licensee) in good faith, for valuable consideration and without notice of the facts entitling the client to give the notice.
925E Agreement unenforceable against client
(1) This section:
(a) applies while both of the following are the case:
(i) the client is entitled to give a notice under section 925A;
(ii) a notice so given will result under section 925B in rescission of the agreement; and
(b) applies after the agreement is rescinded under section 925B;
but does not otherwise apply.
(2) The non-licensee is not entitled, as against the client:
(a) to enforce the agreement, whether directly or indirectly; or
(b) to rely on the agreement, whether directly or indirectly and whether by way of defence or otherwise.
925F Non-licensee not entitled to recover commission
(1) Without limiting the generality of section 925E, this section:
(a) applies while the client is entitled to give a notice under section 925A; and
(b) applies after the client so gives a notice, even if the notice does not result under section 925B in rescission of the agreement;
but does not otherwise apply.
(2) The non-licensee is not entitled to recover by any means (including, for example, set-off or a claim on aquantum meruit) any brokerage, commission or other fee for which the client would, but for this section, have been liable to the non-licensee under or in connection with the agreement.
925G Onus of establishing non-application of section 925E or 925F
For the purposes of determining, in a proceeding in a court, whether or not the non-licensee is, or was at a particular time, entitled as mentioned in subsection 925E(2) or 925F(2), it is to be presumed, unless the contrary is proved, that section 925E or 925F, as the case may be, applies, or applied at that time, as the case may be.
925H Client may recover commission paid to non-licensee
(1) Without limiting the generality of section 925D, if the client gives a notice under section 925A, the client may, even if the notice does not result under section 925B in rescission of the agreement, recover from the non-licensee as a debt the amount of any brokerage, commission or other fee that the client has paid to the non-licensee under or in connection with the agreement.
(2) ASIC may, if it considers that it is in the public interest to do so, bring an action under subsection (1) in the name of, and for the benefit of, the client.
925I Remedies under this Division additional to other remedies
The client’s rights and remedies under this Division are additional to, and do not prejudice, any other right or remedy of the client.