Section 766B of the Corporations Act 2001 (Cth) (“the Corporations Act”) sets out the meaning of financial product advice. Both the primary judge (Gleeson J) in ASIC v Westpac Securities Administration Ltd [2018] FCA 2078 and the Full Federal Court (Allsop CJ, Jagot and O’Bryan JJ) in ASIC v Westpac Securities Administration Ltd (2019) 272 FCR 170; [2019] FCAFC 187 found that Westpac had impliedly recommended that a particular customer roll over her external accounts into her BT account. In doing so Westpac had transcended the role of giving general advice and had assumed the higher standard of obligations imposed by s 766B(3)(b) of the Corporations Act for providers of personal advice.

In Westpac Securities Administration Ltd v ASIC [2021] HCA 3 the High Court dismissed Westpac’s appeal and agreed with the Full Federal Court.  

Section 766B(3)(b) defines personal advice to mean circumstances where a reasonable person might expect a financial services provider to have “considered one or more” of that person's objectives, financial situation and needs. In this context, the High Court held that “considered” signifies “took account of”, consistent with the title of s 949A (General advice provided to retail client – obligation to warn client that advice does not take account of client’s objectives, financial situation or needs), rather than taking part in an active process of evaluation and reflection as Westpac had argued.

In doing so, the High Court upheld the decision of the Full Federal Court that Westpac had contravened s 961B of the Corporations Act (and therefore s 961K, the civil penalty provision) by failing to act in the customers’ best interests. Westpac had also contravened s 946A by failing to give each customer a written statement of advice.

Grant Holley of Holley Nethercote Lawyers is revising annotations to Part 7.1 in Robson’s Annotated Corporations Legislation. Section 766B is in Part 7.1 (Preliminary) of Chapter 7 (Financial services and markets) of the Corporations Act.

In addition, this judgment is expected to be discussed by Associate Professor Thomas Middleton in a forthcoming update of ASIC Corporate Investigations & Hearings. 
 

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