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 7.7 - Division 3
Division 3 - Additional requirements for personal advice provided to a retail client
Subdivision A - When this Division applies
944A Situation in which Division applies
This Division applies in relation to the provision of personal advice (the advice ) in the following circumstances:
(a) the advice is provided:
(i) by a financial services licensee (the providing entity ); or
(ii) by a person (the providing entity ) in their capacity as authorised representative of a financial services licensee (the authorising licensee ), or of 2 or more financial services licensees (the authorising licensees ); and
(b) the advice is provided to a person (the client ) as a retail client.
Subdivision B - Requirements relating to basis of advice
945A Requirement to have a reasonable basis for the advice
(1) The providing entity must only provide the advice to the client if:
(a) the providing entity:
(i) determines the relevant personal circumstances in relation to giving the advice; and
(ii) makes reasonable inquiries in relation to those personal circumstances; and
(b) having regard to information obtained from the client in relation to those personal circumstances, the providing entity has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all of the circumstances; and
(c) the advice is appropriate to the client, having regard to that consideration and investigation.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) In any proceedings against an authorised representative of a financial services licensee for an offence based on subsection (1), it is a defence if:
(a) the licensee had provided the authorised representative with information or instructions about the requirements to be complied with in relation to the giving of personal advice; and
(b) the representative’s failure to comply with subsection (1) occurred because the representative was acting in reliance on that information or those instructions; and
(c) the representative’s reliance on that information or those instructions was reasonable.
Note: A defendant bears an evidential burden in relation to the matters in subsection (2). See subsection 13.3(3) of theCriminal Code.
(3) A financial services licensee must take reasonable steps to ensure that an authorised representative of the licensee complies with subsection (1).
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
945B Obligation to warn client if advice based on incomplete or inaccurate information
(1) If:
(a) the advice is based on information relating to the client’s relevant personal circumstances that is incomplete or inaccurate; and
(b) the providing entity knows that the information is incomplete or inaccurate, or is reckless as to whether it is incomplete or inaccurate;
the providing entity must, in accordance with subsections (2) and (3), warn the client that:
(c) the advice is, or may be, based on incomplete or inaccurate information relating to the client’s relevant personal circumstances; and
(d) because of that, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the client’s relevant personal circumstances.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) The warning must be given to the client at the same time as the advice is provided and, subject to subsection (3), by the same means as the advice is provided.
(3) If the Statement of Advice (see Subdivision C) is the means by which the advice is provided, or is given to the client at the same time as the advice is provided, the warning may be given by including it in the Statement of Advice.
Note: The Statement of Advice must at least contain a record of the warning - see paragraphs 947B(2)(f) and 947C(2)(g).
Subdivision C - Requirement for a Statement of Advice to be given
946A Obligation to give client a Statement of Advice
(1) The providing entity must give the client a Statement of Advice in accordance with this Subdivision and Subdivision D.
(2) The Statement of Advice may be:
(a) the means by which the advice is provided; or
(b) a separate record of the advice.
(3) This section has effect subject to section 946B.
946B Situations in which a Statement of Advice is not required
Execution-related telephone advice
(1) Subsections (2) to (4) apply to advice ( execution-related telephone advice ) in relation to which the following conditions are satisfied:
(a) the execution-related telephone advice is given by telephone; and
(b) the execution-related telephone advice:
(i) relates to financial products that are able to be traded on a licensed market; and
(ii) is given by the providing entity as an integral part of the execution of a transfer of, or order for, those financial products; and
(c) the execution-related telephone advice does not also contain any other kind of financial product advice.
(2) The providing entity does not have to give the client a Statement of Advice if, before the execution-related telephone advice is provided, the client agrees to a Statement of Advice not being given in respect of the advice, or advice of that kind.
(3) However, at the same time as the advice is provided to the client, the client must be given the information that would, if a Statement of Advice were to be given, be required to be in the Statement by paragraphs 947B(2)(d) and (e), or 947C(2)(e) and (f), as the case requires.
(3A) The providing entity must keep a record of the advice and, in doing so, must comply with any applicable requirements of regulations made for the purposes of this subsection.
Note 1: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Note 2: For the client’s right to a record of the advice, see subsections 942B(8) and 942C(8).
Certain basic deposit and other products
(5) The providing entity does not have to give the client a Statement of Advice if the advice relates to any or all of the following:
(a) a basic deposit product;
(b) a facility for making non-cash payments (see section 763D) that is related toa basic deposit product;
(c) a financial product of a kind prescribed by regulations made for the purposes of this paragraph.
(6) However, if subsection (5) applies and the client is not given a Statement of Advice, the client must instead, when, or as soon as practicable after, the advice is provided, be giventhe information that would be required to be in the Statement of Advice by paragraphs 947B(2)(d) and (e), or 947C(2)(e) and (f), as the case requires.
946C Timing of giving Statement of Advice
General rule
(1) Subject to this section, if the Statement of Advice is not the means by which the advice is provided, the Statement of Advice must be given to the client when, or as soon as practicable after, the advice is provided and, in any event, before the providing entity provides the client with any further financial service that arises out of or is connected with that advice.
Statement of certain information if Statement of Advice not given when advice provided
(2) If the Statement of Advice is not given to the client when the advice is provided, the providing entity must, when the advice is provided, give the client a statement that contains the information that would be required to be in a Statement of Advice by paragraphs 947B(2)(d) and (e), or 947C(2)(e) and (f), as the case requires, and by section 947D, if applicable.
Time critical cases
(3) If:
(a) the client expressly instructs that they require a further financial service that arises out of, or is connected with, the advice to be provided immediately, or by a specified time; and
(b) it is not reasonably practicable to give the Statement of Advice to the client before that further service is provided as so instructed;
the providing entity must give the client the Statement of Advice:
(c) unless paragraph (d) applies - within 5 days after providing that further service, or sooner if practicable; or
(d) if that further service is the provision to the person of a financial product and section 1019B (cooling-off period) will apply to the acquisition of the product by the person - before the start of the period applicable under subsection 1019B(3), or sooner if practicable.
Subdivision D - Content of Statement of Advice
947A Title of Statement of Advice
(1) The title “Statement of Advice” must be used on the cover of, or at or near the front of, a Statement of Advice.
(2) In any other part of a Statement of Advice, “Statement of Advice” may be abbreviated to “SoA”.
947B Statement of Advice given by financial services licensee - main requirements
(1) This section applies if the providing entity is a financial services licensee.
(2) Subject to subsection (3) and to the regulations (see subsection (4)), the Statement of Advice must include the following statements and information:
(a) a statement setting out the advice; and
(b) information about the basis on which the advice is or was given; and
(c) a statement setting out the name and contact details of the providing entity; and
(d) information about any remuneration (including commission) or other benefits that any of the following is to receive that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice:
(i) the providing entity;
(ii) a related body corporate of the providing entity;
(iii) a director or employee of the providing entity or a related body corporate;
(iv) an associate of any of the above;
(v) any other person in relation to whom the regulations require the information to be provided; and
(e) information about:
(i) any other interests, whether pecuniary or not and whether direct or indirect, of the providing entity or of any associate of the providing entity; and
(ii) any associations or relationships between the providing entity or any associate of the providing entity and the issuers of any financial products;
that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice; and
(f) if section 945B requires a warning to be given to the client in relation to the advice - a statement setting out, or recording, the warning required by that section; and
(g) any other statements or information required by the regulations.
(3) Subject to subsection (4), the level of detail about a matter that is required is such as a person would reasonably require for the purpose of deciding whether to act on the advice as a retail client.
(4) The regulations may provide all or any of the following:
(a) that a provision of subsection (2) does not apply in a particular situation;
(b) that particular information is not required by a provision of subsection (2), either in a particular situation or generally;
(c) a more detailed statement of the information that is required by a provision of subsection (2), either in a particular situation or generally.
(5) The Statement of Advice:
(a) must also include any information required by section 947D, if applicable; and
(b) may also include other information.
(6) The statements and information included in the Statement of Advice must be worded and presented in a clear, concise and effective manner.
947C Statement of Advice given by authorised representative - main requirements
(1) This section applies if the providing entity is an authorised representative.
(2) Subject to subsection (3) and to the regulations (see subsection (4)), the Statement of Advice must include the following statements and information:
(a) a statement setting out the advice; and
(b) information about the basis on which the advice is or was given; and
(c) a statement setting out the name and contact details of the providing entity; and
(d) a statement
(i) setting out the name and contact details of the authorising licensee, or of each of the authorising licensees; and
(ii) stating that the providing entity is the authorised representative of that licensee or those licensees; and
(e) information about the remuneration (including commission) or other benefits that any of the following is to receive that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice:
(i) the providing entity;
(ii) an employer of the providing entity;
(iii) the authorising licensee, or any of the authorising licensees;
(iv) an employee or director of the authorising licensee, or of any of the authorising licensees;
(v) an associate of any of the above;
(vi) any other person in relation to whom the regulations require the information to be provided; and
(f) information about:
(i) any other interests, whether pecuniary or not and whether direct or indirect, of the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or of any associate of any of those persons; and
(ii) any associations or relationships between the providing entity, any employer of the providing entity, the authorising licensee or any of the authorising licensees, or any associate of any of those persons, and the issuers of any financial products;
that might reasonably be expected to be or have been capable of influencing the providing entity in providing the advice; and
(g) if section 945B requires a warning to be given to the client in relation to the advice - a statement setting out, or recording, the warning required by that section; and
(h) any other statements or information required by the regulations.
(3) Subject to subsection (4), the level of detail about a matter that is required is such as a person would reasonably require for the purpose of deciding whether to act on the advice as a retail client.
(4) The regulations may provide all or any of the following:
(a) that a provision of subsection (2) does not apply in a particular situation;
(b) that particular information is not required by a provision of subsection (2), either in a particular situation or generally;
(c) a more detailed statement of the information that is required by a provision of subsection (2), either in a particular situation or generally.
(5) The Statement of Advice:
(a) must also include any information required by section 947D, if applicable; and
(b) may also include other information.
(6) The statements and information included in the Statement of Advice must be worded and presented in a clear, concise and effective manner.
947D Additional requirements when advice recommends replacement of one product with another
(1) This section applies (subject to subsection (4)) if the advice is or includes a recommendation that the client dispose of, or reduce the client’s interest in, all or part of a particular financial product and instead acquire all or part of, or increase the client’s interest in, another financial product.
(2) The following additional information must be included in the Statement of Advice:
(a) information about the following, to the extent that the information is known to, or could reasonably be found out by, the providing entity:
(i) any charges the client will or may incur in respect of the disposal or reduction;
(ii) any charges the client will or may incur in respect of the acquisition or increase;
(iii) any pecuniary or other benefits that the client will or may lose (temporarily or otherwise) as a result of taking the recommended action;
(b) information about any other significant consequences for the client of taking the recommended action that the providing entity knows, or ought reasonably to know, are likely;
(c) any other information required by regulations made for the purposes of this paragraph.
(3) If:
(a) the providing entity knows that, or is reckless as to whether:
(i) the client will or may incur charges as mentioned in subparagraph (2)(a)(i) or (ii); or
(ii) the client will or may lose benefits as mentioned in subparagraph (2)(a)(iii); or
(iii) there will or may be consequences for the client as mentioned in paragraph (2)(b); but
(b) the providing entity does not know, and cannot reasonably find out, what those charges, losses or consequences are or will be;
the Statement of Advice must include a statement to the effect that there will or may be such charges, losses or consequences but the providing entity does not know what they are.
(4) The regulations may provide either or both of the following:
(a) that this section does not apply in relation to a financial product or a class of financial products;
(b) that this section does not require the provision of information of a particular kind, whether generally or in relation to a particular situation, financial product or class of financial products.
Subdivision E - Other matters
948A Qualified privilege if providing entity complies with this Division
The providing entity has qualified privilege in respect of a statement made to the client, whether orally or in writing, in the course of, or in connection with, providing the advice if the providing entity has complied with all material requirements of this Division in relation to the advice.