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 7.9 - Division 7
Division 7 - Enforcement
Subdivision A - Offences
1021A Overview
This Division contains provisions creating offences by reference to various rules contained in preceding Divisions of this Part. However, it does not create all the offences relating to those rules, as some offences are created by subsection 1311(1). Where offences are created by subsection 1311(1) in relation to a rule, this is indicated by a note at the end of the provision containing the rule.
1021B Definitions
(1) In this Division:
defective , in relation to a disclosure document or statement, means:
(a) there is a misleading or deceptive statement in the disclosure document or statement; or
(b) if it is a Product Disclosure Statement - there is an omission from the Product Disclosure Statement of material required by section 1013C, other than material required by section 1013B or 1013G; or
(c) if it is a Supplementary Product Disclosure Statement that is given for the purposes of section 1014E - there is an omission from the Supplementary Product Disclosure Statement of material required by that section; or
(d) if it is a statement required by paragraph 1012G(3)(a) to be read to a person - there is an omission from the statement of material required by that paragraph;
being a statement, or an omission, that is or would bematerially adverse from the point of view of a reasonableperson considering whether to proceed to acquire the financial product concerned.
Note: In determining whether a Product Disclosure Statement is defective, the effect of section 1014D must be taken into account (section 1014D takes information and statements in a Supplementary Product Disclosure Statement to be included in the Product Disclosure Statement it supplements).
disclosure document or statement means:
(a) a Product Disclosure Statement; or
(b) a Supplementary Product Disclosure Statement; or
(c) a statement required by paragraph 1012G(3)(a) to be read to a person.
(2) In this Subdivision, a reference (including in the definitions in subsection (1)) to a document or statement of a kind referred to in a paragraph of the definition of disclosure document or statement in subsection (1) includes a reference to something purporting to be a document or statement of that kind.
1021C Offence of failing to give etc. a disclosure document or statement
Strict liability offence
(1) A person (the providing entity ) commits an offence if:
(a) the providing entity:
(i) is required by a provision of this Part to give another person a Product Disclosure Statement or a Supplementary Product Disclosure Statement (the required disclosure document or statement ); or
(ii) is required by paragraph 1012G(3)(a) to read another person a statement (the required disclosure document or statement ); and
(b) the providing entity does not:
(i) if subparagraph (a)(i) applies - give (in accordance with section 1015C) the other person anything purporting to be the required disclosure document or statement by the time they are required to do so; or
(ii) if subparagraph (a)(ii) applies - read the other person anything purporting to be the required disclosure document or statement when they are required to do so.
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
(2) An offence based on subsection (1) is an offence of strict liability.
Note: For strict liability , see section 6.1 of theCriminal Code.
Ordinary offence
(3) A person (the providing entity ) commits an offence if:
(a) the providing entity:
(i) is required by a provision of this Part to give another person a Product Disclosure Statement or a Supplementary Product Disclosure Statement (the required disclosure document or statement ); or
(ii) is required by paragraph 1012G(3)(a) to read another person a statement (the required disclosure document or statement ); and
(b) the providing entity does not:
(i) if subparagraph (a)(i) applies - give (in accordance with section 1015C) the other person anything purporting to be the required disclosure document or statement by the time they are required to do so; or
(ii) if subparagraph (a)(ii) applies - read the other person anything purporting to be the required disclosure document or statement when they are required to do so.
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
Defence for authorised representative
(4) In any proceedings against an authorised representative of a financial services licensee for an offence based on subsection (1) or (3), it is a defence if:
(a) the licensee had provided the representative with information or instructions about the giving of disclosure documents or statements; and
(b) the representative’s failure to give the required disclosure document or statement 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 (4). See subsection 13.3(3) of theCriminal Code.
1021D Offence of preparer of defective disclosure document or statement giving the document or statement knowing it to be defective
(1) A person commits an offence if:
(a) the person prepares (or has someone else prepare for them) a disclosure document or statement; and
(b) the person knows that the disclosure document or statement is defective; and
(c) the person:
(i) gives (see subsection (3)) another person thedisclosure document or statement in circumstances in which it is required by a provision of this Part to be given to the other person; or
(ii) gives (see subsection (3)), or makes available to, another personthe disclosure document or statement reckless as to whether the other person will or may rely on the information in it.
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
(2) A person commits an offence if:
(a) the person prepares (or has someone else prepare for them) a disclosure document or statement; and
(b) the person knows that the disclosure document or statement is defective; and
(c) the person gives (see subsection (3)), or makes available to, another person the disclosure document or statement, reckless as to whether the other person, or someone else, will or may give it, or make it available, to another person as mentioned in subparagraph (1)(c)(i) or (ii).
(3) In this section, give means give by any means (including orally), and is not limited to giving in accordance with section 1015C or paragraph 1012G(3)(a).
1021E Offence of preparer of defective disclosure document or statement giving the document or statement (whether or not known to be defective)
(1) A person commits an offence if:
(a) the person prepares (or has someone else prepare for them) a disclosure document or statement; and
(b) the disclosure document or statement is defective; and
(c) the person:
(i) gives (see subsection (5)) another person the disclosure document or statement in circumstances in which it is required by a provision of this Part to be given to the other person; or
(ii) gives (see subsection (5)), or makes available to, another person a disclosure document or statement, reckless as to whether the other person will or may rely on the information in it.
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
(2) A person commits an offence if:
(a) the person prepares (or has someone else prepare for them) a disclosure document or statement; and
(b) the disclosure document or statement is defective; and
(c) the person gives (see subsection (5)), or makes available to, another person the disclosure document or statement, reckless as to whether the other person, or someone else, will or may give it, or make it available, to another person as mentioned in subparagraph (1)(c)(i) or (ii).
(3) For the purposes of an offence based on subsection (1) or (2), strict liability applies to the physical element of the offence specified in paragraph (1)(b) or (2)(b).
Note: For strict liability , see section 6.1 of theCriminal Code.
(4) In any proceedings against a person for an offence based on subsection (1) or (2), it is a defence if the person took reasonable steps to ensure that the disclosure document or statement would not be defective.
Note: A defendant bears an evidential burden in relation to the matters in subsection (4). See subsection 13.3(3) of theCriminal Code.
(5) In this section, give means give by any means (including orally), and is not limited to giving in accordance with section 1015C or paragraph 1012G(3)(a).
1021F Offence of regulated person (other than preparer) giving disclosure document or statement knowing it to be defective
(1) A regulated person commits an offence if:
(a) another person prepares (or has someone else prepare for them) a disclosure document or statement; and
(b) the regulated person knows that the disclosure document or statement is defective; and
(c) the regulated person:
(i) gives (see subsection (2)) another person thedisclosure document or statement in circumstances in which it is required by a provision of this Part to be given to the other person; or
(ii) gives (see subsection (2)), or makes available to, another personthe disclosure document or statement, reckless as to whether the other person will or may rely on the information in it.
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
(2) In this section, give means give by any means (including orally), and is not limited to giving in accordance with section 1015C or paragraph 1012G(3)(a).
1021G Offence of financial services licensee failing to ensure authorised representative gives etc. disclosure documents or statements as required
A financial services licensee commits an offence if the licensee does not take reasonable steps to ensure that an authorised representative of the licensee complies with their obligations under this Part to give or read disclosure documents or statements as and when required by this Part.
1021H Offences if a Product Disclosure Statement (or Supplementary PDS) does not comply with certain requirements
(1) A person commits an offence if:
(a) the person prepares (or has someone else prepare for them) a Product Disclosure Statement or a Supplementary Product Disclosure Statement (the disclosure document ); and
(b) the disclosure document does not comply with:
(i) if it is a Product Disclosure Statement - section 1013B or 1013G; or
(ii) if it is a Supplementary Product Disclosure Statement - section 1013G, 1014B or 1014C; and
(c) the person:
(i) gives (see subsection (3)) another person the disclosure document in circumstances in which it is required by a provision of this Part to be given to the other person; or
(ii) gives (see subsection (3)), or makes available to, another person the disclosure document, reckless as to whether the other person will or may rely on the information in it; or
(iii) gives (see subsection (3)), or makes available to, another person the disclosure document, reckless as to whether the other person, or someone else, will or may give it, or make it available, to another person as mentioned in subparagraph (i) or (ii).
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
(2) For the purposes of an offence based on subsection (1), strict liability applies to paragraph (b) of that subsection.
Note: For strict liability , see section 6.1 of theCriminal Code.
(3) In this section, give means give by any means (including orally), and is not limited to giving in accordance with section 1015C or paragraph 1012G(3)(a).
1021I Offence of giving disclosure document or statement that has not been prepared by the appropriate person
(1) A regulated person commits an offence if:
(a) the regulated person:
(i) gives (see subsection (2)) another person adisclosure document or statement in circumstances in which it is required by a provision of this Part to be given to the other person; or
(ii) gives (see subsection (2)), or makes available to, another person a disclosure document or statement, reckless as to whether the other person will or may rely on the information in it; and
(b) the disclosure document or statement has not been prepared by, or on behalf of, the person required by section 1013A or paragraph 1012G(3)(a) to prepare it.
Note: A defendant bears an evidential burden in relation to the matters in sections 1012D and 1012E.
(2) In this section, give means give by any means (including orally), and is not limited to giving in accordance with section 1015C or paragraph 1012G(3)(a).
1021J Offences if preparer etc. of disclosure document or statement becomes aware that it is defective
(1) A person commits an offence if:
(a) the person prepares (or has someone else prepare for them) a disclosure document or statement; and
(b) the person becomes aware that the disclosure document or statement is defective; and
(c) the person does not, as soon as practicable, take reasonable steps to ensure that any regulatedperson to whom the disclosure document or statement has been provided for further distribution is given a direction that satisfies one of more of the following subparagraphs:
(i) a direction not to distribute the disclosure document or statement;
(ii) if it is a Product Disclosure Statement - a direction not to distribute the Product Disclosure Statement unless it is accompanied by a Supplementary Product Disclosure Statement that corrects the deficiency;
(iii) if it is a Product Disclosure Statement or a Supplementary Product Disclosure Statement - a direction not to distribute the Product Disclosure Statement or Supplementary Product Disclosure Statement without first altering it in a way that is specified in the direction, being a way that corrects the deficiency and that complies with section 1015E.
(2) A regulatedperson commits an offence if:
(a) the person is given a direction referred to in paragraph (1)(c); and
(b) the person does not comply with the direction.
(3) A regulatedperson commits an offence if:
(a) a disclosure document or statement has been provided to the person for distribution; and
(b) the person becomes aware that the disclosure document or statement is defective; and
(c) the person does not take reasonable steps tonotify the person by whom, or on whose behalf, the disclosure document or statement was prepared of the particulars of the deficiency.
(4) In this section, a reference to distributing a disclosure document or statement includes (but is not limited to) giving or reading the document or statement to another person in purported compliance with a requirement of this Part.
(5) In this section, regulated person has the same meaning as it has in Division 2.
1021K Offence of unauthorised alteration of Product Disclosure Statement (or Supplementary PDS)
(1) A person commits an offence if:
(a) the person engages in conduct that results in an alteration of a Product Disclosure Statement or a Supplementary Product Disclosure Statement that has been prepared by or on behalf of another person (the responsible person ); and
(b) the alteration results in the Product Disclosure Statement or Supplementary Product Disclosure Statement becoming defective, or more defective than it previously was; and
(c) the alteration is not made with the authority of the responsible person; and
(d) either:
(i) the person, in purported compliance with a provision of this Part, gives (see subsection (2)) the altered Product Disclosure Statement or Supplementary Product Disclosure Statement to another person; or
(ii) the person gives (see subsection (2)), or makes available to, another person the altered Product Disclosure Statement or Supplementary Product Disclosure Statement, reckless as to whether the other person will or may rely on the information in it; or
(iii) the person gives (see subsection (2)), or makes available to, another person the altered Product Disclosure Statement or Supplementary Product Disclosure Statement, reckless as to whether the other person, or someone else, will or may give it, or make it available, to another person as mentioned in subparagraph (i) or (ii).
(2) In this section, give means give by any means (including orally), and is not limited to giving in accordance with section 1015C.
1021L Offences of giving, or failing to withdraw, consent to inclusion of defective statement
(1) A person commits an offence if:
(a) they consent to the inclusion of a statement (the consented material ) in a Product Disclosure Statement or a Supplementary Product Disclosure Statement as mentioned in paragraph 1013K(1)(a); and
(b) either:
(i) there is a misleading or deceptive statement in the consented material; or
(ii) there is an omission of information from the consented material; and
(c) the statement or omission is or would bematerially adverse from the point of view of a reasonableperson considering whether to proceed to acquire the financial product concerned.
(2) A person commits an offence if:
(a) they consent to the inclusion of a statement (the consented material ) in a Product Disclosure Statement or a Supplementary Product Disclosure Statement as mentioned in paragraph 1013K(1)(a); and
(b) they become aware that either:
(i) there is a misleading or deceptive statement in the consented material; or
(ii) there is an omission of information from the consented material;
being a statement, or an omission, that:
(iii) is or would bematerially adverse from the point of view of a reasonableperson considering whether to proceed to acquire the financial product concerned; or
(iv) results in the Product Disclosure Statement or the Supplementary Product Disclosure Statement being defective, or more defective than it would otherwise be; and
(c) they do not withdraw their consent after becoming aware of the matter mentioned in paragraph (b).
1021M Offences relating to keeping and providing copies of Product Disclosure Statements (or Supplementary PDSs)
Strict liability offence
(1) A person commits an offence if:
(a) the person is required by section 1015D:
(i) to notify ASIC that a Product Disclosure Statement or a Supplementary Product Disclosure Statement is in use; or
(ii) to keep a copy of a Product Disclosure Statement or a Supplementary Product Disclosure Statement for a particular period; or
(iii) to make a copy of a Product Disclosure Statement or a Supplementary Product Disclosure Statement available to ASIC; or
(iv) to comply with a request from a person for a copy of a Product Disclosure Statement or a Supplementary Product Disclosure Statement; and
(b) the person does not comply with that requirement.
(2) An offence based on subsection (1) is an offence of strict liability.
Note: For strict liability , see section 6.1 of theCriminal Code.
Ordinary offence
(3) A person commits an offence if:
(a) the person is required by section 1015D:
(i) to notify ASIC that a Product Disclosure Statement or a Supplementary Product Disclosure Statement is in use; or
(ii) to keep a copy of a Product Disclosure Statement or a Supplementary Product Disclosure Statement for a particular period; or
(iii) to make a copy of a Product Disclosure Statement or a Supplementary Product Disclosure Statement available to ASIC; or
(iv) to comply with a request from a person for a copy of a Product Disclosure Statement or a Supplementary Product Disclosure Statement; and
(b) the person does not comply with that requirement.
1021N Offence of failing to provide additional information requested under section 1017A
A person (the responsible person ) commits an offence if:
(a) a request is made to them by another person, in accordance with subsection 1017A(1), to provide further information about a financial product; and
(b) the responsible person is required by subsection 1017A(2) to give the other person the information; and
(c) the other person has paid any charge in respect of the request, being a charge that is in accordance with subsections 1017A(5) and (6); and
(d) the responsible person does not take reasonable steps to ensure that, as soon as practicable after receiving the request, and in any event within one month, the information is provided to the other person in accordance with subsection 1017A(4).
1021O Offences of issuer or seller of financial product failing to pay money into an account as required
Strict liability offence
(1) An issuer or seller of financial products commits an offence if:
(a) the issuer or seller is required by subsection 1017E(2) to pay particular money into an account in accordance with that subsection; and
(b) the issuer or seller does not pay the money into an account in accordance with that subsection.
(2) An offence based on subsection (1) is an offence of strict liability.
Note: For strict liability , see section 6.1 of theCriminal Code.
Ordinary offence
(3) An issuer or seller of financial products commits an offence if:
(a) the issuer or seller is required by subsection 1017E(2) to pay particular money into an account in accordance with that subsection; and
(b) the issuer or seller does not pay the money into an account in accordance with that subsection.
Subdivision B - Civil liability
1022A Definitions
(1) In this Subdivision:
defective , in relation to a disclosure document or statement, means:
(a) there is a misleading or deceptive statement in the disclosure document or statement; or
(b) if it is a Product Disclosure Statement - there is an omission from the Product Disclosure Statement of material required by section 1013C, other than material required by section 1013B or 1013G; or
(c) if it is a Supplementary Product Disclosure Statement that is given for the purposes of section 1014E - there is an omission from the Supplementary Product Disclosure Statement of material required by that section; or
(d) if it is a statement required by paragraph 1012G(3)(a) to be read to a person - there is an omission from the statement of material required by that paragraph.
Note: In determining whether a Product Disclosure Statement is defective, the effect of section 1014D must be taken into account (section 1014D takes information and statements in a Supplementary Product Disclosure Statement to be included in the Product Disclosure Statement it supplements).
disclosure document or statement means:
(a) a Product Disclosure Statement; or
(b) a Supplementary Product Disclosure Statement; or
(c) a statement required by paragraph 1012G(3)(a) to be read to a person.
(2) In this Subdivision, a reference (including in the definitions in subsection (1)) to a document or statement of a kind referred to in a paragraph of the definition of disclosure document or statement in subsection (1) includes a reference to something purporting to be a document or statement of that kind.
1022B Civil action for loss or damage
(1) This section applies in the following situations:
(a) a person:
(i) is required by a provision of this Part to give another person (the client ) a Product Disclosure Statement or a Supplementary Product Disclosure Statement (the required disclosure document or statement ); and
(ii) does not give (in accordance with section 1015C) the client anything purporting to be the required disclosure document or statement by the time they are required to do so; or
(b) a person:
(i) is required by paragraph 1012G(3)(a) to read another person (the client ) a statement (the required disclosure document or statement ); and
(ii) does not read the client anything purporting to be the required disclosure document or statement when they are required to do so; or
(c) a person:
(i) gives another person (the client ) a disclosure document or statement that is defective in circumstances in which a disclosure document or statement is required by a provision of this Part to be given to the client; or
(ii) is a regulated person and gives, or makes available to, another person (the client ) a disclosure document or statement, being a Product Disclosure Statement or a Supplementary Product Disclosure Statement, that is defective, reckless as to whether the client will or may rely on the information in it; or
(d) a person:
(i) gives consent to the inclusion of a statement in a Product Disclosure Statement or a Supplementary Product Disclosure Statement as mentioned in subsection 1021L(1), disregarding paragraph 1021L(1)(c); or
(ii) does not take reasonable steps to withdraw such a statement as mentioned in subsection 1021L(2), disregarding subparagraphs 1021L(2)(b)(iii) and (iv); or
(e) a person contravenes section 1017B or 1017D.
In paragraph (c), give means give by any means (including orally), and is not limited to giving in accordance with section 1015C or paragraph 1012G(3)(a).
(2) In a situation to which this section applies, if a person suffers loss or damage:
(a) if paragraph (1)(a) applies - because the client was not given the disclosure document or statement that they should have been given; or
(b) if paragraph (1)(b) applies - because the client was not read the statement that should have been read to them; or
(c) if paragraph (1)(c) applies - because the disclosure document or statement the client was given was defective; or
(d) if paragraph (1)(d) applies - because the consent referred to in that paragraph was given, or was not withdrawn, as the case requires; or
(e) if paragraph (1)(e) applies - because of the contravention referred to in that paragraph;
the person may recover the amount of the loss or damage by action against the, or a, liable person (see subsections (3) to (5)), whether or not that person (or anyone else) has been convicted of an offence in respect of the matter referred to in paragraph (a), (b), (c), (d) or (e).
(3) For the purposes of subsection (2), the, or a, liable person is:
(a) if paragraph (1)(a) or (b) applies - subject to subsection (4), the person first-referred to in that paragraph; or
(b) if paragraph (1)(c) applies - subject to subsection (5):
(i) the person by whom, or on whose behalf, the disclosure document or statement was prepared; and
(ii) each other person involved in the preparation of the disclosure document or statement who, directly or indirectly, caused the disclosure document or statement to be defective or contributed to it being defective; or
(c) if paragraph (1)(d) applies - the person who gave the consent; or
(d) if paragraph (1)(e) applies - the person who contravened the provision concerned.
(4) If paragraph (1)(a) or (b) applies and the person who would, but for this subsection, be the liable person is an authorised representative, the authorised representative is not the liable person and the following paragraphs apply:
(a) if the authorised representative is an authorised representative of only one financial services licensee - that financial services licensee is the liable person;
(b) if the authorised representative is an authorised representative of more than one financial services licensee:
(i) if, under the rules in section 917C, one of those licensees is responsible for the person’s conduct - that licensee is the (or a) liable person; or
(ii) if, under the rules in section 917C, 2 or more of those licensees are jointly and severally responsible for the person’s conduct - each of those licensees is a liable person.
(4A) For the purposes of paragraph (4)(b):
(a) section 917C is taken to apply, despite section 917F; and
(b) section 917D is taken not to apply.
(5) If:
(a) paragraph (1)(c) applies; and
(b) an alteration was made to the disclosure document or statement before it was given to the client; and
(c) the alteration made the disclosure document or statement defective, or more defective than it would otherwise have been; and
(d) the alteration was not made by, or with the authority of, the person who would, but for this subsection, be a liable person because of subparagraph (3)(b)(i);
then, so far as a person has suffered loss or damage because the disclosure document or statement was defective because of the alteration, the person who made the alteration is a liable person, rather than the person referred to in paragraph (d).
(6) An action under subsection (2) may be begun at any time within 6 years after the day on which the cause of action arose.
(7) A person is not liable under subsection (2) in a situation described in paragraph (1)(c) if the person took reasonable steps to ensure that the disclosure document or statement would not be defective.
(8) This section does not affect any liability that a person has under any other law.
1022C Additional powers of court to make orders
(1) The court dealing with an action under subsection 1022B(2) may, in addition to awarding loss or damage under that subsection and if it thinks it necessary in order to do justice between the parties:
(a) make an order declaring void a contract entered into by the client referred to in that subsection for or relating to a financial product or a financial service; and
(b) if it makes an order under paragraph (a) - make such other order or orders as it thinks are necessary or desirable because of that order.
(2) Without limiting paragraph (1)(b), the orders that may be made under that paragraph include (but are not limited to) an order for the return of money paid by a person, and/or an order for payment of an amount of interest specified in, or calculated in accordance with, the order.