AFA News 18 February 2021. On Wednesday 3 February 2021, ASIC issued a media release to announce the outcome of a High Court appeal by Westpac against an earlier Full Federal Court Decision that found in favour of ASIC. The case was based upon action that ASIC took against Westpac for a call centre-based superannuation consolidation campaign. Consistent with the earlier outcome, ASIC won in the High Court. This is an important outcome with broad implications.
At the crux of this matter was the judgement as to whether the advice provided by these Westpac subsidiaries was general advice or personal advice. The High Court found that the advice was personal advice, with the result being that Westpac will have failed to comply with all the obligations that come with providing personal advice.
This decision confirms that the trigger for what constitutes personal advice is quite low and that where the adviser has relied upon knowledge of the client’s circumstances or a reasonable person would expect them to have relied upon this knowledge, then they are likely to be caught. The definition of personal financial advice is contained within Section 766B(3) of the Corporations Act.
(3) For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where:
(a) the provider of the advice has considered one or more of the person’s objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or
(b) a reasonable person might expect the provider to have considered one or more of those matters.
In this case, despite the general advice warning being provided at the start of the conversation, the court formed the view that a superannuation fund calling its members in these circumstances would have some knowledge of the member’s circumstances and that a reasonable person would assume that this was taken into account.
There are obvious important lessons in this for super funds and in our view, this extends to beyond super consolidation campaigns, to also include client retention activity, where a hold recommendation is given. There are also important lessons for financial advisers, as this reinforces the reality that it is very difficult for a financial adviser to provide general advice to an existing client. Extreme caution would need to be taken, and the adviser should be absolutely certain that the client understands that the adviser had not taken the client’s personal circumstances into account.
Please click here to read the ASIC media release.
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Issued 18.02.2021. AFA Policy & Education Update