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We have conducted training programs for fund managers for some years to help identify what communications with investors are authorised by their general advice authorisation and what may inadvertently stray into personal advice.
However we were never really able to provide any certainty about how the courts would interpret the second limb of the personal advice definition in section 766B(3)(b) of the Corporations Act 2001 because it had never been considered by the superior courts.
We now have decisions from both the High Court and the Full Court of the Federal Court about how to interpret section 766B(3).
Section 766B(3) provides:
(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
Before this High Court decision, we did not know how the words “might expect the provider to have considered” would be interpreted.
The ASIC v Westpac proceedings
In October 2019 the Full Court of the Federal Court looked at the phone campaign conducted by Westpac and BT Funds Management with a view to ‘encouraging’ existing customers to roll their other superannuation accounts into the ones held by Westpac or BT. The general advice warning had been provided each time. All three judges found that Westpac had provided personal advice and our November 2019 article about that decision can be found here.
Westpac appealed that decision to the High Court. The High Court has now looked at section 766B(3) and provided the following interpretation of what it means:
What does this mean for your business?
ASIC Commissioner Danielle Press has stated that “[This] judgment will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients,” and confirmed ASIC is willing to bring enforcement against incorrectly and improperly-given personal financial product advice.