Corporations Act 2001

CHAPTER 7 - FINANCIAL SERVICES AND MARKETS  

Note: This Chapter applies to a CCIV in a modified form: see Division 4 of Part 8B.7 .

PART 7.6 - LICENSING OF PROVIDERS OF FINANCIAL SERVICES  

Division 3 - Obligations of financial services licensees  

Subdivision C - Notifying and remediating clients affected by reportable situations  

SECTION 912EB   OBLIGATION TO INVESTIGATE REPORTABLE SITUATIONS THAT MAY AFFECT CLIENTS  

Obligation to investigate

912EB(1)    
A financial services licensee must conduct an investigation into a reportable situation in accordance with this section if:

(a)    the licensee, or a representative of the licensee, provides or has provided personal advice to a person as a retail client (the affected client ) in relation to a relevant financial product; and

(b)    there are reasonable grounds to believe that the reportable situation has arisen in relation to the licensee as mentioned in:

(i) paragraph 912D(1)(a) (significant breach of a core obligation); or

(ii) subsection 912D(2) (gross negligence or serious fraud); and

(c)    there are reasonable grounds to suspect that:

(i) the affected client has suffered or will suffer loss or damage as a result of the reportable situation; and

(ii) the affected client has a legally enforceable right to recover the loss or damage from the licensee.

Period within which investigation must be commenced

912EB(2)    
The investigation must be commenced within 30 days after the financial services licensee first knows of, or is reckless with respect to, the circumstances mentioned in paragraphs (1)(a) , (b) and (c) .

Matters to be considered in the investigation

912EB(3)    
In conducting the investigation, the financial services licensee must:

(a)    identify the conduct that gave rise to the reportable situation; and

(b)    quantify the loss or damage that there are reasonable grounds to believe:

(i) the affected client has suffered or will suffer as a result of the reportable situation; and

(ii) the affected client has a legally enforceable right to recover from the licensee; and

(c)    do anything else prescribed by the regulations for the purposes of this paragraph.

Completing the investigation

912EB(4)    
The investigation must be completed as soon as is reasonably practicable after it is commenced.

Notifying affected client

912EB(5)    
The financial services licensee must take reasonable steps to give the affected client a notice of the outcome of the investigation:

(a)    in writing within 10 days after the completion of the investigation; and

(b)    if ASIC has approved the form in which the notice must be given:

(i) in the approved form; and

(ii) that includes the information, statements, explanations or other matters required by the form; and

(iii) that is accompanied by any other material required by the form.

912EB(6)    
A financial services licensee has qualified privilege in relation to a notice given under subsection (5) .

912EB(7)    
A financial services licensee who has qualified privilege under subsection (6) in respect of conduct is also not liable for any action based on breach of confidence in relation to that conduct.

Compensating the affected client for loss or damage

912EB(8)    
If, after the investigation is completed, there are reasonable grounds to believe that:

(a)    the affected client has suffered or will suffer loss or damage as a result of the reportable situation; and

(b)    the affected client has a legally enforceable right to recover the loss or damage from the financial services licensee;

the licensee must take reasonable steps to pay the affected client an amount equal to the loss or damage within 30 days after the investigation is completed.

Civil penalty provision

912EB(9)    
A person contravenes this subsection if the person contravenes subsection (1) , (5) or (8) .

Note: This subsection is a civil penalty provision (see section 1317E ).

Nothing affects right of affected client to pursue legally enforceable rights

912EB(10)    
Nothing in this section affects any legally enforceable right of the affected client to recover loss or damage that the affected client suffers, or will suffer, as a result of a reportable situation.

912EB(11)    
However, a court may take into account the amount paid by the financial services licensee under this section when quantifying the amount of compensation (if any) to be paid by the licensee in relation to that loss or damage.

Meaning of knowledge and recklessness

912EB(12)    

For the purposes of this section:

knowledge
has the meaning given by section 5.3 of the Criminal Code .

recklessness
has the meaning given by section 5.4 of the Criminal Code .