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Financial Advice Regulation - Question 1

Daniella is a financial adviser. She is an authorised representative of Advisory Ltd. In the course of her work, she is approached by Tim. Tim is a successful property developer and has a sum of money that he would like to invest outside of his property development business. However, outside of his own business of buying land and building houses, Tim has almost no knowledge about investing.

In their first meeting, Tim and Daniella have a general discussion over coffee about the types of investments that Tim could make. Amongst other things, Daniella explains in general terms what the share market is, what self-managed superannuation funds are, and what term deposits are.

Daniella also explains her role and what a financial adviser generally does.Tim has to leave for another appointment before they can discuss anything further. At the end of their meeting, Tim thanks Daniella for the discussion and says he would like to retain her to provide more specific financial advice. They arrange a second meeting in the following week.

In the second meeting, Tim asksDaniella about investing in shares and Forex and he asks her how to set up a self-managed superannuation fund.

Discuss the following:

A. What disclosure documents does Daniella have to provide to Tim and when does she need to provide each document?

B. What are the content requirements for each document?

C. What are the consequences of failing to each document?


A. The Regulatory Guide 168.16-168.18 by the Australian Securities and Investments Commission puts forward that retail clients are entitled to receive a number of disclosure documents prior to acquiring any financial product. Considering that Tim has no idea about investing in the share market, Daniella would have to provide her with a number of disclosure documents with the most prominent being the FSG or the financial services guide. Personal advice and any investment suggestions may be provided in a SOA or statement of advice. Lastly, a PDS or a product disclosure statement would also have to be provided. It is important to note that the disclosure documents must be relevant and complete and promote product understanding.

The FSG must be provided to Tim prior to giving him the financial service. The SOA would have to given to Tim when advising him about which share to buy or when to buy it. It would have to be provided as soon as practicable after which advice is provided. The SOA must be given before Daniella gives Tim any further advice regarding the purchase of the shares. The PDS must be given to Tim at or before any recommendation to purchase a financial product is made, any offer that arranges the issue of a financial product or if a seller makes an offer to sell the product which requires a disclosure.

B. FSGs contain all the information regarding the service provider, the kinds of services offered, who the service provider is acting for, means of remuneration for the service provider and any relationships that may go on to influence the service provider during the delivery of the services.

SOAs contain the advice and the basis of the explanation, the credentials of the advice provider, remuneration or any interest of the service provider and the associations that may influence him or her. PDSs include the fees that would be payable in respect of the financial product, the risks and the benefits, any significant characteristics and other specific information.

C. The failure to provide a FSG could contravene the provisions of the Corporations Act, and a hearing process that finds that the FSG was not provided in case of a valid requirement, the license of the service provider may be revoked.

RG175.217 provides that it is an offence to not provide a SOA when required as per the provisions contained in s925c of the Corporations Act. Court proceedings could be initiated against Daniella in case she fails to provide a SOA, and her license would also be revoked.

Failure to provide a FSG when required would also constitute an offence unless the advice is general or Tim refuses to provide his address. Otherwise, it would be considered as a contravention to the Corporations Act and a proceeding would be instituted against Daniella.

Financial Advice Regulation - Question 2

Simply Advisers Ltd (SAL) is a robo advice company that relies upon algorithms and digital technologyto provide investment advice to its clients. In order to access to SAL services, clients need to enter their personal information including mobile phone number, email address, annual income, superannuation fund and the amount of saving they have. In April 2020, an email was sent to John who is the Chief Digital Officer of SAL asking for detailed discloser of all clients who set up self managed super fund (SMSF). The sender of the email claim that he is the Australian Tax Office second commissioner and the reason of the request was to assess SMSF performance during COVID-19. The email address that the sender used was so John believed that it is from the Australian Tax Office and went on and downloaded a spreadsheet with all SAL clients who set up their SMSF.

In the following day, SAL contacted SAL complaining about lots of emails addressing them by name and inviting them for SMSF’s seminars and events. After contacting the Australian Tax Office, John realised that the request email was a scammer and he was told that Australian Tax Office will never ask for such information.

Discuss the following:

  • What are SAL's obligations under the Privacy Act 1988 (Cth)?
  • How can this data breach be dealt with according to the Office of the Australian Information Commissioner (OAIC) guide?


Considering SAL or Simply Advisers Limited operates as an organization, the foremost responsibility would be to lodge a complaint with the Commissioner that the data breach took place and that an interference with the privacy of the individual was evident. This is in accordance to division 1 Section 36 of the Privacy Act 1988. Following the process of lodging the complaint, an investigation process would be initiated whereby the key objective of the Commissioner would be to conciliate the complaint. Based on the investigation, a determination of the complaint would be made and this would lead to the emergence of a number of obligations on the organisation or the small business operator, which is SAL in this case. Covered under Division 3 Section 55 of the Privacy Act 1988, the obligations would warrant SAL to not repat or continue conduct that would be covered by a declaration included within the determination of the Commissioner under sub paragraph 52(1)(b)(i)(B) or paragraph 52(1A)(a). SAL would also be obligated to take steps that are have been specified or outlined within the declaration under subparagraph 52(1)(b)(ia) or paragraph 52(1A)(b) within the period stipulated. Lastly, the SAL would also have to perform or act the course of conduct that would be covered by the declaration within the determination of the Commissioner under subparagraph 52(1)(b)(ii) or paragraph 52(1A)(c).

The first and most prominent guiding proposition by the OAIC or the Office of the Australian Information Commissioner is that the response to a data breach needs to be tailored to circumstances that surround the incident. The general instructions warrant a four step process comprised of containing the breach, assessing the breach, notifying necessary authorities and and review the incident.

The first step of containing the data breach would primarily require SAL to take every measure possible to prevent any further compromise of critical information and personal credentials due to the incident.

The second step of assessing the data breach would require SAL to gather the facts surrounding the data breach and evaluate the potential risks associated with the breach. The potential harm that could be inflicted onto the victims of the data breach would also have to be assessed thoroughly and extensively. Furthermore, every action, as and when necessary, would have to be taken by SAL to remediate any risk of the harm.

The third step of notifying the individuals and the Commissioner based upon the requirements of the incident would also have to be engaged in by the company. If it was a breach that was eligible under the NDB or the Notifiable Data breach, it would be mandatory for SAL to notify.

The fourth and the final step involved in dealing with the data breach would be to review the incident and consider whether any action or strategy could be undertaken to prevent a similar breach in the future.

Financial Advice Regulation - Question 3

OZInsurance is an insurance provider and a member ofAustralian Financial Complaints Authority (AFCA). OZInsurance’s representative contacted Claire to offer her a travel insurance. Claire refused the offer because she has health insurance policy which covers her abroad. OZInsurance’s representative encouraged Claire to buy travel insurance because “most of health insurance provider will not cover for all your hospital admission abroad” he said. Claire believed him and purchased travel insurance from OZInsurance. After two weeks, she realised that her health insurance covers her for all health needs including hospital admission abroad.

Discuss the following:

  • What options are available to Claire?
  • What are the obligations of OZInsuranceas a member of AFCA?


The behaviour engaged in by the representative of the OZInsurance would be considered as misleading and deceptive as per the best practise guidelines issued by the AFCA. Insurance companies within Australia are required to act in an open, honest and fair manner in all of their dealings. The first option that would be available to Claire would be lodge a formal complaint with the insurer, which is OZInsurance in this case. The claims manager would have to be contacted and the complaint would be reviewed followed by a written provision of the outcome of the complaint. Claire could also lodge the dispute with the Ombudsman, which is referred to as External dispute resolution. The complaint would be made to AFCA, which comprises of a binding authority to provide an outcome regarding the actions engaged in by the insurer.

As a member of the AFCA, OZInsurance would be under a number of obligations that are relevant to the complaint system as well as in general. The general understanding for insurers is that they must act in good faith and always engage in full disclosure while dealing with consumers. Furthermore, insurers are strictly prohibited from misleading or deceiving clients into purchasing the financial product. The obligations in the case of a complaint would require OZInsurance to take reasonable steps to cooperate with the AFCA and resolve the complaint at the earliest. The company would also be obligated to provide reasonable assistance to the AFCA and identify, locate and provide documents to the ADCA necessary to resolve the complaints. Lastly, OZInsurance would also be required to give effect to any declaration within the determination made by the AFCA in the context of the complaint as it comprise of final and binding authority on insurance matters.

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