Financial Services Licences and Product Disclosure - Assignment Example

Corporation Law Student’s Name Professor’s Name Course Date PART A: Financial Services Licences and Product Disclosure Question 1 Jenny’s immediate obligations in this case are many. Under s766A Jenny is obligated with ensuring that she is sensibly practicable of carrying out her duties in that; she is doing all the required things in making sure that she is operating in a fair, transparent and orderly market. Second, she must comply with her licence’s condition. Third, she must ensure that she possesses adequate resources like, human, technological, and financial resources among others for the purposes of operating effectively within the market. The other obligation is that; if part 881A demands that a requirement of compensation arrangements regarding the market which are accepted according to the Division 3 of section 7.5- Jenny ought to ensure that such verified compensation arrangements regarding the market are in place. The other obligation in Jenny’s operations is ensuring that; if her operating licence tends to be overseas body corporate, its registration falls under Division 2 of section 5 B.2. On the other hand, Jenny’s continuing obligation includes first; notifying ASIC of certain issues. That involves written notices to the ASCIC at the required moments. The other continuing obligation involves offering ASIC information regarding any listed disclosing body whereby, failure to comply to offer such information is tantamount to an offence outlined in s 1311 (1). The other obligation is helping ASIC itself, authorised ASIC person or agency. Such help might include displaying Jenny’s book or offering other imperative information. The other obligation is notifying people about glade and settlement plans in certain situations. Question 2 In this scenario, S 769C is most relevant Jenny’s obligations of advising John are multiple. The first obligation is that, Jenny should warn her client that (a) preparation of the advise she is giving John has been made irrespective of considering John’s needs, financial situation or objectives and (b) as result of that, John ought to ahead of implementing the advice, make considerations of the advice’s suitability, think about John’s financial needs and situation, and objectives and (c) if Jenny’s advice is related to likely acquisition or acquisition of a specific financial product s 766 (a) (b) and (c)- John ought to under s 766 (d): (i) provided the product does not belong to CGS depository interest – get a Product Disclosure Statement that is associated to that product and make considerations of Statement prior to resolving whether to obtain or reject the product (ii) when the product happens to be a CGS depository interest- get every information statement for the CGS depository interests class which entails the product and make considerations of the statement prior to resolving whether or not to attain that product. However as it was held in Commercial Bank of Australia Ltd v Amadio, a contract of guarantee is not a contract uberrimae fidei. However, Jenny would be liable to the client aspects of the insurance product that the guarantor naturally and legitimately expects. As was held in the case Jenny would not be liable for non-disclosure or misrepresentation due to her special inability since she no longer works with eternal life. As such, it would be unconscionable for her to be liable for misrepresentation or non-disclosure s 798 DA. The other Jenny’s obligation is giving a warning to John, simultaneously as giving advice using similar means. If the superannuation policy proves insufficient to John’s needs, Jenny would face strict potential liabilities as her advice statement does not fulfil certain requirements. As such, any fiscal authorised representative or financial services licensee, executes crime if she does not offer a client an Advice Statement in situations that are required by provisions of that portion to be offered to that individual and the Advice’s Statement never complies with S 947E or S 947A. Question 3 In this scenario, Jenny tends to be offering her personal advice to John on purchasing the XYZ’s interests in an equities fund. As such, Jenny is obligated with giving John a product disclosure statement (PDS). According to the S 911B, a regulated person is entitled to giving an individual a PDS for the fiscal product if according to S 916 and 917 (a) (b) (c) (d) (e) (f): (a) the regulated individual offers fiscal product advice to that person that include, or consist of, an advice that the individual obtain that financial product; (b) the individual would obtain the fiscal product through issue or transfer of the product; (c) the fiscal product recommendation is offered to the client as the retail customer; and (d) the advice’s financial product tends to be customer’s personal advice. In the long run, PDS must be offered before or at the moment the regulated individual offers the recommendation. The potential legal liabilities of XYZ and Jenny in this scenario are: (a) repaying the funds received from John, under S 917E a (i) giving John a new PDS for the company’s fiscal products together with an extra statements which points out the things which the new PDS turns to be materially dissimilar from the initial PDS, and (ii) one month of withdrawing their application and getting paid. The other potential legal liability of Jenny and XYZ is providing John with a Supplementary PDS which alters the statements talked about in ; (a) above whereby failure to adhere with that is equal to a crime. Woodcroft-Brown v Timbercorp Securities Ltd & Ors [2011] VS It was held that it was the duty of the plaintiffs to prove that they depended on the defective information in making investments. However, the ruling also asserts that it is the responsibility of the directors in this instance Jenny to take reasonable steps to ensure no eventual significant risks are in the PDS. It is thus critical that those risk be disclosed to the client including information on how they are being managed. Question 4 The legal obligation of George is giving Julia professional advice regarding purchasing of superannuation products S 1012F. On the other hand, Personal Insurance legal obligation is offering insurance services to all the clients that approach it for them. As a matter of fact, there are potential legal liabilities that exist with this deal. In this regard, (1) If: (a) an insurance contract is effected or arranged by a licensee’s financial services; and (b) the insurer turns not to be the licensee; the payment of the payable money to the licensee (regardless in terms of premiums or anything else) by the insured relative or under the agreement turn to be discharge, as between the insurer and the insured, of the insured’s liability to the insurer respective to those funds S 1012I. (2) Payment to the financial services licensee on behalf or by an intending money insured relative to an insurance contract to be effected or arranged by the licensee with the insurer turns to be the discharge that is between the insurer and insured, of whichever insured’s liability relative to or under an insurance contract, never discharges whichever liability of the insured party to the insuring firm concerning these funds S1017BA. The first remedy that might be available to Julia is joining mortgages. In this case, she would be capable of acquiring loans and pay it in small amounts. The other remedy would be borrowing a loan from the bank that she gets her salary from her employer. The other remedy would be borrowing from family and friends, and pay later wholly or in small amounts S1017BB. Question 5 In this scenario, it is the mistake of the company to prepare a document that contains factual errors. Thus, legal obligations exist in this case. According to corporate law1021E, it is an offense to the person who prepares a faulty disclosure statement or document (whether not known or known to be flawed). As such, the Managed Investments obligation is ensuring giving true or factual information to all verbal or written communications to the clients S1017B. The other legal obligation of Managed Investments is ensuring that necessary legal steps are taken when the information given to the client is faulty or missing. The person responsible for preparing the document should be interrogated to know whether it was intentional or not S 1017 (a) and (b). If the author is found guilty, she should be taken to the relevant authorities for giving further information on the intent and disciplinary action. The author of the document made misguided the company by preparing faulty disclosure document and gave it to the public. Potential liabilities also exist in this case. As such, Managed Inventories are liable for making payments for the damages incurred by Jane as it is mandated in acting for the client’s best interests s 1017BB and CC. On the other hand, remedies exist in Jane’s situation. First, money that Jane had paid can be refunded together with the extra money that the company had written in its document. The other remedy is that Jane can decide to sell the units that she had bought as her investment and invest in another way like, purchasing securities S1016F. PART B Question 6 The issue in this instance is the competing interests in closely held groups. The relevant case is Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2013] VSC 543. This case demonstrates the duties of company directors to the company as opposed to the wider interest of the given commercial grouping. Under the Corporations Act of 2001 directors have the duty to act with care and diligence and to act in good faith and loyalty. As a company director, he will be liable on whether he acted in the company’s best interests. It must e shown that his proposals to source funding from eternal life were not for the benefit of the company. David will be liable under the Corporations Act if he exercises his director's powers to act unilaterally to obtain funding. Under Section 187 of the corporations Act the constitution must expressly authorize the director to make critical decisions such as sourcing funding in the interest of the company. Nevertheless the actions of the director must not lead to insolvency of the corporation due to these actions of the director. Question 7 In this scenario, since that advertisement is financial, it would be a mandatory requirement to refer statement of product disclosure. It is the requirement of Corporation law SSection (734) 1 that (1) if a certain financial product becomes available for purchase by individuals as wholesale customers through issue, or in accordance to offers of sale, an individual must merely: (a) issue a statement which is reasonably liable to persuade individuals to purchase the product, or (b) make advertisements of the product; when the statement or advertisement: (c) recognizes: (i) the product availability trough method of issuing- the product’s issuers; or (ii) if pursuant to selling offers the product availability to which part Section (1012) C would apply or applies-the product’s issuer as well as the seller’s product; and (d) point out that a PDS for that product is obtainable and the place it can be availed; and signifies that an individual ought to make considerations of the PDS in resolving whether to continue holding or purchase that product. It is also a requirement that the publication or advertisement never breaches subsection (1) when it (a) is associated to the financial product which is capable of being traded on the financial market and comprises of a report or notice by the product’s issuer, or a particular officer, regarding its affairs to the operator of the market s 1044 (a) and (b); or (b) comprises solely of report or notice of the issuer’s general meeting; or (c) is a report regarding the issuer’s financial products advertised by somebody rather than the issuer’s director, issuer or an individual who possesses interest within the issuer’s sale or success of a fiscal product s 1044 (c). Question 8 In this scenario, there are apparent significant potential legal liabilities. My first advice to David and George is that they should advertise factual information regarding the sale of cars the following year. If George and David go on and advertise the company’s statement of increasing sales and the clients invest in that company, there would be legal liabilities. Actually, the corporation law s 1021 and 1022 points out that (1) the client possesses the right of returning any financial product to the person responsible and to have their paid money in acquisition repaid. That must be done irrespective of the culprit winding up her business; (2) the product’s right of returning ought to be exercised through notifying the person responsible through electronically, writing or within other specified ways in the rules. Importantly, if the rules demand the client to adhere to other demands for the purposes of exercising the right to take back the product, the other demands are mandatory to be adhered to. The courses of action that those directors should take are many. Undr s 1044 First, the directors should ensure that they provide factual information to the clients. In doing so, they would escape legal liability of refunding the customers money and going experiencing losses. Second, the directors should work for the best interests of their clients. In this regard, they should provide the best services that would be enjoyed by all clients as held in Section 1317 and 1318S. Third, the directors should adopt a habit of arriving at a common understanding for the benefit of all. In this case, none of them can support providing misleading information for the company’s gains. Question 9 According to the Corporations Act 2001, my advice to the legal obligations of A Ltd is always ensuring that advertisements contain factual information. According to the Corporation Act 2001, it is an offense for a person, whether knowing or not to provide defective information regarding the sale of securities to any person as was held in James Hardie Industries NV v ASIC. Directors have a duty to provide factual information on an ongoing basis to investors who intend to purchase investments s 1044 (a) and (b). As was held in ASIC v Chemeq corporations need to foster a culture of compliance to relevant legistlation when making all corporate decisions. Damages incurred to the misled person are subject to be paid by the provider of information. My advice to A Ltd is ensuring that the company follows the securities laws. The first general rule is registration requirement. Under s 1074 (e) and (f)The securities act prohibits the sale or offer of whichever security unless a registration statement exists to all intents and purposes for a transaction. Therefore, the managers ought to be aware that the transaction without registration requirement is improper. My other advice to the companies that they should ensure the filing of disclosure demands associated with acquisition. As a matter of fact, the Corporation law requires someone who turns to be the valuable owner of not less than 5% of a set of equity shares of an issuer to file a plan with the SEC within ten days of the acquisition. The filling in this case by the acquirer acts as the timely warning procedure to the public and target that the acquirer might look for gaining control of the objective. My other advice to both companies is taking care of state anti –takeover rules. Issues originating from state-takeover policies should be addressed at all means by the managers concerned. Question 10 Actually, A Ltd should be aware that the Corporations Act 2001 stipulates that it is an obligation of all entities to adhere to the prevailing market integrity rules. Thus, Green should be aware that ASIC which acts in the best interest of the public has the capacity of giving necessary directions in order to protect investors from suffering losses in this deal. As such market integrity should be ensured by A Ltd. Failure by A Ltd to obey ASIC directions would be regarded as a felony as in subsection (1311 (1)). On the other hand, A Ltd is obligated to offering Public Disclosure Statement for the debentures even if; the sale amounts to indirect issue, it is a controller’s off-market sale or the sale amounts to controller’s off-market indirect sale according to the Corporation Law 2001. In this case, a regulated person is obligated to giving an individual a PDS for the financial product in case: (a) the regulated individual wants to sell the fiscal product to that individual; and (b) the sale of that product to that person in relation to the offer would occur in certain specified circumstances like, the sale amounts to indirect issue; and (c) the fiscal product being sold would be sold to that person as being the retail client. Thus, Green should be aware that lack of ensuring PDS is an offence that would result to paying of damages that the clients might incur. An example of a case law on a senior employee’s risk factor- Form S-1 of the year 199 “initial public offering of Martha Stewart Living Omnimedia, Inc. that happened to be the risk factor”. It stated that “the loss of Martha S services or other major workers would practically significantly have an effect on our prospects, operation results and revenues. The risk factor offers a warning of repercussions of Stewarts loss like how Green might find himself in. Work Cited Office of Parliamentary Counsel. Corporation Act 2001. 2014. Web. 4 November 2013. Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 Woodcroft-Brown v Timbercorp Securities Ltd & Ors [2011] VS Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd [2013] VSC 543 ASIC v Chemeq Ltd [2006] FCA 936 Read More