Section 912A of the Corporations Act 2001 (Cth) requires financial services licensees to have adequate arrangements for managing conflicts of interest that may arise in relation to the provision of financial services.

Section 912A of the Corporations Act 2001 (Cth) mandates that financial services licensees must have adequate arrangements in place for managing conflicts of interest that may arise in relation to the provision of financial services. This requirement is aimed at ensuring that financial services providers act in the best interests of their clients and avoid any potential conflicts of interest that may compromise their duty of care.

The factual background of this provision is rooted in the need to protect consumers from any potential harm caused by conflicts of interest in the financial services industry. Conflicts of interest can arise when a financial services provider has competing interests or loyalties that may influence their advice or recommendations to clients. For example, a financial advisor who receives commissions for recommending certain financial products may be incentivized to recommend those products over others that may be more suitable for the client’s needs.

To address this issue, Section 912A requires financial services licensees to have adequate arrangements in place to manage conflicts of interest. This includes implementing policies and procedures to identify and manage conflicts of interest, disclosing any conflicts of interest to clients, and taking steps to mitigate any potential harm caused by conflicts of interest.

Several case laws and judgments have helped to clarify the scope and application of Section 912A. In ASIC v Westpac Securities Administration Ltd [2010] FCA 1378, the Federal Court found that Westpac had breached Section 912A by failing to adequately disclose conflicts of interest in relation to the sale of complex financial products to retail clients. The court held that Westpac’s failure to disclose these conflicts of interest had resulted in a breach of its duty to act in the best interests of its clients.

Similarly, in ASIC v Commonwealth Financial Planning Ltd [2014] FCA 51, the Federal Court found that Commonwealth Financial Planning had breached Section 912A by failing to implement adequate policies and procedures for managing conflicts of interest in relation to the provision of financial advice. The court held that Commonwealth Financial Planning’s failure to manage these conflicts of interest had resulted in a breach of its duty to act in the best interests of its clients.

Other relevant case laws include ASIC v Macquarie Bank Ltd [2013] FCA 1342, where the Federal Court found that Macquarie had breached Section 912A by failing to adequately disclose conflicts of interest in relation to the sale of complex financial products to retail clients, and ASIC v National Australia Bank Ltd [2018] FCA 35, where the Federal Court found that National Australia Bank had breached Section 912A by failing to implement adequate policies and procedures for managing conflicts of interest in relation to the provision of financial advice.

In summary, Section 912A of the Corporations Act 2001 (Cth) requires financial services licensees to have adequate arrangements in place for managing conflicts of interest that may arise in relation to the provision of financial services. This requirement is aimed at ensuring that financial services providers act in the best interests of their clients and avoid any potential conflicts of interest that may compromise their duty of care. Several case laws and judgments have helped to clarify the scope and application of this provision, highlighting the importance of implementing robust policies and procedures for managing conflicts of interest in the financial services industry.