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 7.8 - Division 7
Division 7 - Other rules about conduct
991A Financial services licensee not to engage in unconscionable conduct
(1) A financial services licensee must not, in or in relation to the provision of a financial service, engage in conduct that is, in all the circumstances, unconscionable.
(2) If a person suffers loss or damage because a financial services licensee contravenes subsection (1), the person may recover the amount of the loss or damage by action against the licensee.
(3) An action under subsection (2) may be begun at any time within 6 years after the day on which the cause of action arose.
(4) This section does not affect any liability that a person has under any other law.
991B Financial services licensee to give priority to clients’ orders
(1) This section applies if:
(a) a person (the client ) has instructed a financial services licensee to buy or sell financial products of a particular class that are able to be traded on a licensed market; and
(b) the licensee has not complied with the instruction; and
(c) the client is not an associate of the licensee; and
(d) regulations made for the purposes of this paragraph do not exclude those financial products from this section.
(2) The financial services licensee must not, except as permitted by subsection (3):
(a) enter into a transaction of purchase or sale of financial products of that class either on their own behalf or on behalf of an associate of the licensee; or
(b) instruct another person to enter into a transaction of purchase or sale of financial products of that class on behalf of the licensee or an associate of the licensee.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(3) Subsection (2) does not apply in relation to the entering into of a transaction, or the giving of an instruction, by the licensee if:
(a) the client’s instructions required the purchase or sale to be effected only on specified conditions relating to price and the licensee has been unable to comply with the instructions because of those conditions; or
(b) the transaction, or the giving of the instruction, is permitted by regulations made for the purposes of this paragraph.
Note: A defendant bears an evidential burden in relation to the matters in this subsection. See subsection 13.3(3) of theCriminal Code.
991C Regulations may deal with various matters relating to instructions to deal through licensed markets
The regulations may do all or any of the following in relation to instructions received by financial services licensees to deal in financial products through licensed markets:
(a) impose requirements relating to the order in which instructions are to be transmitted to a licensed market or to another financial services licensee who is a participant in a licensed market;
(b) impose requirements relating to the order in which dealings that have been effected on a licensed market are to be allocated to instructions;
(c) prohibit the disclosure of instructions in specified circumstances.
991D Regulations may require records to be kept in relation to instructions to deal on licensed markets and foreign markets
The regulations may impose requirements for the keeping of records relating to all or any of the following:
(a) instructions received by financial services licensees to deal in financial products through licensed markets or through other financial markets (whether inside or outside Australia);
(b) the execution of such instructions;
(c) the transmission of such instructions.
991E Obligations of financial services licensee in relation to dealings with non-licensees
Obligation to disclose if acting on own behalf
(1) Subject to the regulations, a financial services licensee must not, either personally or through an authorised representative, enter into a financial product transaction on their own behalf:
(a) that relates to a financial product that is able to be traded on a licensed market; and
(b) that is with a person (the non-licensee ) who is not a financial services licensee or an authorised representative;
if:
(c) the licensee has not (in accordance with any applicable regulations made for the purposes of paragraph (2)(a)) disclosed to the non-licensee the fact that the licensee will be acting on their own behalf in the proposed dealing; or
(d) the non-licensee has not (in accordance with any applicable regulations made for the purposes of paragraph (2)(b)) consented to the licensee so acting in the proposed dealing.
If the licensee is acting through an authorised representative, the disclosure referred to in paragraph (c) may instead be given by the representative.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) The regulations may deal with either or both of the following:
(a) how a disclosure referred to in paragraph (1)(c) is to be made;
(b) how a consent referred to in paragraph (1)(d) is to be given.
Obligation not to charge fee
(3) If a financial services licensee, either personally or through an authorised representative, enters into a transaction of sale or purchase of financial products on their own behalf:
(a) that relates to a financial product that is able to be traded on a licensed market; and
(b) that is with a person (the non-licensee ) who is not a financial services licensee or an authorised representative;
the licensee must only charge the non-licensee a brokerage, commission or other fee in respect of the transaction if the charge is permitted by the regulations.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
Person may rescind contract if section contravened
(4) If subsection (1) or (3) is contravened in relation to a transaction (whether or not anyone is convicted of an offence in respect of the contravention), the non-licensee may, subject to subsection (5), rescind the contract effecting the transaction, unless the contract was for the purchase of financial products by the non-licensee and the non-licensee has disposed of those products.
(5) The right under subsection (4) to rescind the contract:
(a) can only be exercised during the period of 14 days starting on:
(i) unless subparagraph (ii) applies - the day on which the contract was entered into; or
(ii) if regulations made for the purposes of this subparagraph specify a later day - that later day; and
(b) is to be exercised by notice in writing to the licensee.
(6) Nothing in subsections (4) and (5) affects any other right that a person has.
Regulations may require records to be kept in relation to transactions entered into by licensee on own behalf
(7) The regulations may impose requirements for the keeping of records relating to financial products transactions entered into by a financial services licensee on their own behalf.
991F Dealings involving employees of financial services licensees
(1) Subject to the regulations, a financial services licensee and an employee of the licensee must not, on their own behalves, jointly acquire a financial product.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(2) Subject to the regulations, a financial services licensee must not give credit to an employee of the licensee, or to a person who they know is an associate of an employee of the licensee, if:
(a) the credit is given for the purpose of enabling the person to whom the credit is given to acquire a financial product; or
(b) the licensee knows or has reason to believe that the credit will be used for the purpose of acquiring a financial product.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(3) Subject to the regulations, a person:
(a) who is an employee of a financial services licensee that is a participant in a licensed market; and
(b) who is so employed in connection with a business of dealing in financial products;
must only, on their own behalf, acquire or agree to acquire a financial product of a kind that is able to be traded on that market if the licensee acts as the agent of the person in respect of the acquisition.
Note: Failure to comply with this subsection is an offence (see subsection 1311(1)).
(4) In this section, a reference to an employee of a financial services licensee includes, for a licensee that is a body corporate, a reference to an officer of the body.