On 28 October 2019, the Full Court of the Federal Court handed down its decision in ASIC v Westpac Securities Administration Limited  FCAFC 187.
The unanimous decision of the Court was that Westpac Securities Administration Limited (Westpac) had provided “personal advice” rather than just “general advice” in telephoning customers to suggest that they would benefit if they consolidated their superannuation accounts with a Westpac subsidiary. In particular, the Court rejected a key finding at first instance that the word “considered” in the definition of personal advice in the Corporations Act required “an active process of evaluating or reflecting upon” and “an active intellectual engagement with” the subject matter of consideration, instead preferring the ordinary meaning of “considered” such that by giving advice that “[took] into account” or “had regard to” any one or more of its customers’ objectives, financial situation, this was enough for Westpac to be giving personal advice. This led Westpac to breach section 766B(3) of the Corporations Act, as well as other associated obligations under the Corporations Act, including the obligation to act in the best interests in the customer.
The Court also held that Westpac had breached its obligation as an Australian Financial Services Licensee to do all things necessary to ensure that the financial services covered by its licence are provided “efficiently, honestly and fairly”, with Chief Justice Allsop expressing the view that:
“It could hardly be seen to be fair, or to be providing financial product advice fairly, or efficiently, honestly and fairly, to set out for one’s own interests to seek to influence a customer to make a decision on advice of a general character when such decision can only prudently be made having regard to information personal to the customer…”
The issue of whether advice is general or personal advice is more relevant to those advising retail investors. However, in the professional arena the case is relevant as it provides a reminder that in giving general advice, product issuers must ensure that they are not inadvertently providing personal advice to retail clients.
More particularly, operators in the professional arena (e.g. an underwriters or a joint lead manager) also need to act “efficiently, honestly and fairly”. What does acting “fairly” mean in this context? O’Bryan J in the Westpac case said “it seems to me that there is no reason why it cannot carry its ordinary meaning which includes an absence of injustice, even-handedness and reasonable. … It seems to me that … the ordinary meaning of the words used in s 912A(1)(a) is to impose three concurrent obligations on the financial services licensee: to ensure that the financial services are provided efficiently, and are provided honestly, and are provided fairly”.
A failure by a licence holder to act “fairly” may be the basis on which the ASIC will now take enforcement action. The ASIC has identified “fairness” and the need to “address poor financial advice outcomes” as a key focus.
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