Banking Law

Amid the outbreak, Eliza decided to retire earlier. One day, she saw an advertisement on Twitter by AsYouWish Pty Ltd ("AYW")-a firm holding Australian financial services licence (AFSL), allowing it to give advice about life insurance and superannuation products to its retail clients. The website of AYW stated that "Cash Up to $10,000 When You Take Financial Advice from Us! No Credit Check!"She thought this was fantastic to get more cash so that she can be more comfortable. She proceeded to put in her contact details on AYW's website to obtain the cash rebate of $10,000. Within an hour, Eliza received a call from Matt, an employee of AYW to go through only a couple of basic questions about her age, occupation, savings, and income. Although Eliza was pretty vague in terms of her source of income and did not even talk about her financial needs or retirement plan, Matt advised Eliza to switch her superannuation policies to a new provider to be eligible for the cash rebate. Advice fees were charged against Eliza's superannuation funds, and AYW received the commission from the insurer and paid Eliza a cash rebate from the commission earned. Eliza's superannuation balance, as she noticed, dropped by 35% not long after the change. AYW's internal policies state that its employees should always direct clients to switch their superannuation to a company called "SmartSuper." Since its establishment in 2014, AYW has held only one training session for its employees and authorised representatives about their financial adviser obligations under the FOFA legislation. Please advise Eliza on the following issues:

1. Eliza has noticed that the "best interests duty" under s 961B (1) of Corporations Act 2001 (Cth) could apply to a retail client. Please advise Eliza how to be classified as a retail client.

2. Assuming that Eliza meets the retail client requirement, in your view then, did Matt breach the "best interests duty"? Do you think that Matt can defend himself under s.961B(2) in regard to his conduct? Please use legislation and case law to explain why/why not by referring to the above facts. Also, briefly explain whether the liabilities under s961K(2) and s 961L will be triggered in this case.

3. Eliza is reading the Banking Royal Commission Report, which details the Commissioner's recommendation around the best interests duty. Among other issues, she is very interested in knowing whether or not abolishing the "safe harbour" provision-as suggested by Commissioner Hayne-is a good idea. Please share your view with her.