SAMPLE EXAM QUESTION - FINANCE LAW

Question 1 (30 marks)

Big MoneyInvestments Ltd (Big Money) is a new Australian Financial Services Licensee (AFSL), ASIC having just issued to them a licence.

PaulJones (Paul) andIvySmith (Ivy) are the Responsible Managers.

PaulandFredMcDonald, an employee ofBig Money, will both provide personal financial product advice under this licence. Services will be provided to retail clients only.

Ivywill be in charge of the business operations.

The AFSL has authorisations to provide financial product advice and deal in a financial product in relation to the following financial products:

Basic deposit

Securities

Managed investments

Superannuation

Margin Lending

PaulandIvyhave determined that they will charge clients an hourly rate of $330 (GST inclusive) for any advice provided, in addition to a 1% fee on any funds under advice that they manage.

Ivyhas also established a referral arrangement with a nearby accounting practiceNimbleNumbers Pty Ltd (Numbers).The arrangement includes the payment to Numbers of 15% of any revenue earned byBig Moneyfrom that client in the first year.

A friend ofFred's - KeithFlinstone(Keith) has askedFredto provide him with advice in relation to some life insurance coverage, retirement planning, now that he is just a few years away from retiring, and the selection of a suitable fund/s for him to invest $15,000 for each of his grandchildren as a reward for completing their university studies.

Big Money's legal counsel have advised them, now that they hold an AFSL that they have obligations in relation to anti-money laundering.

PaulandIvyhave a few queries about the new arrangements and what their obligations are, they have asked you to advise them on the following matters:

a)As responsible managers what are they specifically responsible for and do they have any ongoing requirements that they need to meet? (4 marks)

b)In relation to their employeeFred, whattype of supervision and monitoring processes should they consider? (4 marks)

c)Paulknows that because they are providing advice to retail clients that he needs to provide them with a Financial Services Guide.AdvisePaulon the content requirements and when the guide needs to be distributed.Ensure you note any specific information from the facts provided above that may impact on the content ofBig Money's guide. (6 marks)

d)PaulandFredwant you to provide them with an overview of the advisory process including any duties that they must meet and how they can demonstrate that they have met these (provide practical examples).Ensure that your response takes into consideration the facts noted above. (12 marks)

e)Outline toPaulandIvywhat if any responsibilitiesBig Moneyhas in relation to anti-money laundering. (4 marks)