Australian Securities and Investments Commission was involved in investigating the conduct of OBC BANKING PTY LTD regarding allegations that it did not consider their personal circumstances when offering financial advice. Here is a real world example of conduct from the case Australian Securities and Investments Commission v Cassimatis (No 8) [2016] FCA 1023 (26 August 2016)

ASIC presented its case against Mr and Mrs Cassamatis on the basis that they breached s 180(1)by causing and/or permitting Storm to provide advice to particular investors in accordance with the Storm model in a manner which caused Storm to actually contravene certain sections of the Corporations Act, including s 945A(1). That provision, which was repealed in 2012, required that a financial services licensee such as Storm must only provide advice to a client if (amongst other things):

having regard to information obtained from the client in relation to their relevant personal circumstances, the providing entity has given such consideration to, and conducted such investigation of, the subject matter of the advice as is reasonable in all of the circumstances: s 945A(1)(b); and

the advice is appropriate to the client, having regard to that consideration and investigation: s 945A(1)(c).

Edelman J said that ASIC set a high bar for itself to establish liability, to the extent that he had serious doubt whether an actual breach by a corporation is a necessary requirement for breach of s 180(1). His Honour nevertheless proceeded on that basis because it was the way that the parties had conducted their case.

In terms of the particular investors, there were 45 individuals, or 27 individuals or couples, upon whom ASIC ultimately relied. In short, these were persons who were retired, or approaching retirement, and who were particularly vulnerable to losses (on account of them having little income and few assets apart from their family home and limited superannuation).

As for the Storm model of investment advice, which Mr and Mrs Cassimatis developed, in broad summary it involved the concept of borrowing to invest more than the investors would otherwise be prepared to do, for a period (or investment time horizon) of 5 years or longer. The strategy was described by one witness as double gearing and involved the investors (i) borrowing against the security of their homes; (ii) obtaining a margin loan; and (iii) using the funds from these loans to invest in index funds, establishing a cash reserve, and paying Storms fees.

Q4 Which powers can ASIC use to investigate ? 300 words

Q5 Could ASIC require the owners of Storm (Sergio Cassimatis) to appear in a hearing ? 7 marks 300 words

Q6 Could ASIC require the production of internal company documents? 7 marks 300 words