On 28 October 2019, the full Federal Court, in the matter of ASIC v Westpac Securities (2019) FCAFC 187 handed down an important decision regarding the distinction between personal and general advice.
Background
In 2014 and 2015, Westpac engaged in a telephone campaign to encourage existing customers to roll-over their existing external superannuation into accounts that they already held with Westpac. The case concerned advice given to 15 customers by Westpac’s Super Activation Team. Westpac was plainly interested in the outcome of the conversation as it stood to make large fees should the recommendations be accepted.
Westpac engaged in detailed training of their staff as to the distinction between personal and general advice. Customers were told by Westpac staff that Westpac was giving “general advice” only.
ASIC brought proceedings in the Federal Court alleging that the act of calling clients and encouraging them to rollover their superannuation accounts constituted providing “personal advice” in relation to financial products under Section 766B(3) of the Corporations Act, a financial service for which Westpac was not authorised to provide under their AFSLs.
At the first trial, the primary judge found that Westpac had given general not personal advice.
Decision
On appeal, JJ’s Allsop, Jagot and O’Bryan found that the advice carried within it an implied recommendation that the customers should rollover their accounts. Allsop J found that the context of the call was important. His Honour referred to what was said, not said, the tone of the call, the follow up calls, the existing relationship with the clients and found that the Westpac employees had made an implied recommendation that the customers should rollover their superannuation fund interests.
Further, it was found that Westpac did not act in the best interests of the customers because the clients’ best interests could only be served by conducting a more detailed enquiry into their circumstances. Here, the Court noted the definition of personal advice in Section 766B (3) of the Corporations Act:
- Personal advice is given where the advisor has considered one or more of the person’s objectives, financial situation and needs; or
- A reasonable person might expect the advisor to have considered one or more of those matters.
Overall the Court found that in the giving of personal advice, Westpac also breached both the “best interests” duty and the obligation to act efficiently, honestly and fairly.
The decision has important ramifications for the providers of financial product advice. While an adviser may say, subjectively, “I am only giving general advice”, the Court, imposing an objective standard, may decide the matter otherwise.
Justice Jagot described Westpac’s conduct as “systematic sharp practice about what must have been one of their client’s major financial concerns, their superannuation”.
According to Justice O’Bryan:
“The telephone campaign was directed to persons with whom Westpac had an existing relationship and in a real sense occupied a position of trust with respect to the customer’s superannuation fund. Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters they should consider before deciding to consolidate their superannuation. Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision. Through the campaign, Westpac pursued its own self-interest and disregarded the best interests of its customers.”
Clients should be aware that in certain cases the Court will impose an objective standard in order to determine what level of enquiry should be made in any particular telephone call.
Know Compliance Advice
With its team of highly experienced staff, Know Compliance is in a position to advise clients should they be considering engaging in similar marketing campaigns. Know Compliance can help clients to train their staff to ensure that they don’t “cross the line” into giving personal advice and to act at all times in their clients’ best interests.