Law of Financial Institutions and Services - Essay Example

Law of Financial Institutions and Services Name of the professor Name of University Date: FINANCIAL INSTITUTIONS AND SERVICES Introduction Financial product advice means a recommendation, statement of an opinion and or an interpretation of information or a report, which is capable of influencing individuals view on particular financial decisions. When financial services business is taken to be carried out, it must be done within given jurisdiction. This paper discusses various laws relating to financial services and licensing of financial advisors. Relating to Financial Services According to law section 766B of the ASIC Act, financial product advice means a recommendation, statement of an opinion and or an interpretation of information or a report of any of the following (AON, 2014). First, the opinion or statement is intended to influence individual or persons in making decisions concerning specific financial services and class of pecuniary products or an interest in a specific financial product or category of financial product (AON, 2014). The opinion could reasonably be regarded as being intended to have such an influence. The personal advice concerning financial merchandise is given and directed to a person that includes electronic communication in situations where the provider of the advice has painstaking the aims financial circumstances and desires of a person or the person might be reasonably have expected the provider to have considered such matters (ASIC, 2001). In general financial advice, the financial product that is not personal kind of advice, it is provided to the general public at large. According to section 766B, John is providing a financial service on a personal level. This is because the advice, which he gives, is capable of influencing person’s decisions concerning financial investment (ASIC, 2001). According to section 766 C of the Act on dealing in financial product, the Act states that dealing in a financial product constitutes application for or getting a financial product, issuing a financial invention and in relation to securities or managed investment(ASIC, 2001). The article further elaborates on the various interest on underwriting the securities or interest to include; 1. Varying a financial product 2. Disposing of financial product and 3. Acting as an authorized representative, acting under folder, in commerce with, or settling an insurance claim (ASIC 2001). The Act also states that an act involving brings to mind or testing to induce an individual to engage in the above-mentioned conduct constitutes dealing unless such actions constitute financial product advice (Anthony, 2004). Therefore, according to this Act, John is involved in financial advice though not authorized to do so. According to section 766D of the Act, it defines the meaning of what a makes a market for a financial product. The Act states that a person makes a market for a financial product on condition that,; first, through a facility at a place or otherwise, the person regularly states prices at which they proposes to acquire or dispose of financial products on their own behalf(Anthony, 2004). Secondly, the other people have a reasonable expectation that they will be able to affect transactions regularly at these started prices. Lastly, the transaction of the person may not or would not if they happened through a capability or at a place, compose a working financial product markets owing to section 767A (3), only one person regularly makes offers (ASIC 2001). Carrying out financial services business In part 7.6 section, 922D of the SIC Act stipulates the procedure of carrying out a financial services business. When financial services business is taken to be carried on within the following jurisdiction (Joseph, 2001). Where in the itinerary of the person haulage on the trade, the person involve in demeanor that is first, intended to induce a person or people within this jurisdiction to use the financial services the person provide, or is probable to have that result(ASIC 2001). Whether or not the actions is wished-for or likely to have such effect, whether or not the conduct is intended or is likely to such influences in other places as well (Joseph, 2001). Section 912A of the Act stipulates the general obligation of financial services licenses, section 912B, give adequate compensation arrangements if financial services provided to persons as retail clients and types. Section 912C direction to provide information as statements, section 912D give obligation to notify ASIC of certain matters lastly, section 912E stipulates Surveillance check by ASIC (ASIC 2001). Section 912A stipulates that financial services licensee must ensure that the financial services are provided in an honest and efficient manner, which is fair to all parties (ASIC 2001). The institute management of conflicts of interest arising, in relation to activities undertaken by license or representative, unless monitored by APRA have adequate financial technology and resources to provide financial services covered by the license and risk management system (ASIC 2001). The Act also provides maintain those financial services, it ensure adequate training of representatives and if financial services provided to retail clients, have a dispute resolution system as per subsection 2 of the Act. Any person who has an internal dispute resolution system that complies with ASIC requirements and regulations and covers complaints against the license by the retail clients (ASIC 2001). Several institution institutions offer financial advises apart from individual organization. The law guiding financial counseling applies both to individual financial counselors and to corporate financial advisors. Part D section 2 of the ASIC Act, gives details of disclosure to investors about the securities investment in stock exchange (Joseph, 2001). Section 705 of the Act stipulates four major types of disclosure documents for securities that should be used by all financial advisors (ASIC 2001). One of the factors with the current disclosure regime gives complex and lengthy documents that emphasizes on the disclosure but that do not enhance consumer understanding of the financial product making the work of financial advisors necessary and crucial in financial industry. ASIC (Joseph, 2001), should in a position to comply with all the rules and regulations lay down both individual advisors and corporate advisors. Types and conditions of getting license There are two types of license that John can apply to work of the financial advisor in Australia financial sector (Joseph, 2001). The first type of license is when one is carrying on a business giving advice about financial product. He or she is required by ASIC to hold an Australian financial service license (Joseph, 2001). This Act imposes by the corporation Act 2001. In a situation where one is providing credit services, then he or she is required to hold Australian credit license. The National consumer credit protection Act 2009 imposes this requirement on the service providers. The Australian Security and Investment Commission (ASIC) monitor the two requirements (Joseph, 2001). Financial service advisors are normally not liable from the licensing necessities for all an Australian Financial services license and credit. Nevertheless, the exemptions are only subject to a strict condition (Susan, 2005). It is crucial that that the individuals understands the terms under exemptions before he or she has not applied for the permission (Susan, 2005). There are specific financial advisors that are exempted from licensing. They are advisors and advocacy services, which individually assist people during financial difficulties. It should be noted that financial advisors are different from financial planners (Susan, 2005). Most of the financial advisors do work in a charitable organization; however, the governments employ some (AON, 2014). The ones providing financial advice are free of charge they are confidential and independent. In the year 2003, the Australia Security and Investment commission came up with financial relief for financial counseling agencies. Section 913A stipulates the requirement and procedure for r license application (AON, 2014). The criteria of granting the practicing certificate include good fame and character. Conviction for serious fraud may lead to cancellation of the orders that have been given (AON, 2014). Section 915 A to 915B explains conditions under which immediate suspension or cancellation of the practicing license that has bee awarded by ASIC, and this is done after proper hearing has been made (Susan, 2005). The Act states that if one is offering and gives financial product advice as part of financial counseling as John does, the financial counseling agency is not required to hold a license as long as the agency: first, does not charge any fees or receive any commission that comes as a result from financial counseling services (ASIC 2001). The individual does not run and in any way associated with any financial service business; the staff does not by any means do not make available any financial product counseling outside the provisos and conditions of exemptions. A person or an organization should also ensure that its' financial counseling services have appropriate training, skills and knowledge (ASIC 2001). The national consumer credit protection Act 2010 gives proper guidelines and stipulates that financial counseling services be let off from the requisite to seize a credit license (ASIC 2001).. This indicates that if you engage in any way credit activity as part of financial counseling services, your financial counseling agency is not required to hold practicing license. The terms of not holding credit license are similar to those of providing financial counseling services (Joseph, 2001). If one needs more information, concerning financial counseling the terms of licensing contains all the requirements. Reference AON (2014) Hewitt Financial Advice Financial Services and Credit Guide Aon Hewitt Financial Australian Financial Services Licence 239183 ASIC (2001) Licensing: Organisational Capacities: ASIC Policy Proposal: FSRB Policy Proposal Paper No 2 (April 2001): Read More