Case Studies on Business and Corporation Law

Case Studies on Business and Corporation Law
Case Studies on Business and Corporation Law
Student Name
Institute Name
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Case Studies on Business and Corporation Law
Table of Contents
Question 1...................................................................................................................................................2
Issue........................................................................................................................................................2
Rule.........................................................................................................................................................2
Application..............................................................................................................................................3
Conclusion...............................................................................................................................................4
Question 2...................................................................................................................................................5
Issue........................................................................................................................................................5
Rule.........................................................................................................................................................5
Application..................................................................................................................................................6
Conclusion...............................................................................................................................................6
Question 3...................................................................................................................................................7
Issue........................................................................................................................................................7
Rule.........................................................................................................................................................7
Application..............................................................................................................................................8
Conclusion...............................................................................................................................................8
References...................................................................................................................................................9
Question 1
Issue
Analysis of the facts of the case, it can be clearly seen that the main issue in this matter is if the
advice provided by Laura Smartypants who was a financial advisor and accountant in profession
to Magnolia was justified and according to the prescribed code of conduct of a Financial Advisor
in Australia and if the Laura is liable for the losses that was faced by Magnolia in this case. The
aforesaid questions can be answered in the below mentioned paragraphs
Rule
According to the provisions of the Corporations Amendment (Professional Standards of
Financial Advisers) Act 2017, there are various measures that has to be taken in Corporations
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Case Studies on Business and Corporation Law
Act 2001 in respect of ethical standards., training, education etc for the financial advisors in
terms of providing personal advice to the client in case any financial product which is complex in
nature (ACCCA, 2019).
The Corporations Act 2001 (Cth) prescribes the rule of imposing liability on the financial advisor
who are engaged in deceptive and misleading conduct while dealing with a client and
subsequently they faced losses due to the misleading conduct of the financial advisor. However,
the Corporation Act 2001 also provides the opportunity to the financial advisor to reduce the
liability for the identification of the claimant conduct who has also contributed to the loss. This is
otherwise known as apportionment of liability (Commission, Professional standards for financial
advisers – reforms, 2019).
In the provided case, the conduct of Laura was misleading due to which Magnolia faced heavy
financial losses. Laura did not follow the standard code of conduct including duty of care as
prescribed for financial advisor by Australian Securities and Investment Commission while
providing financial and personal advice to Laura. Hence the conduct of Laura is deceptive and it
can be liable for apportionment according to the Corporations Act 2001 (Commission, Disputes
about the financial advisers register, 2016).
Application
There are several theories and concepts in relation to the subject of misleading and deceptive
conduct by the financial advisors. The Federal Court in this regard has provided two major
decisions recently which have different conclusion. The analysis of the aforesaid case laws has
been provided below (Commission, Working with a financial adviser, 2018):
Selig v Wealthsure Pty Ltd [2015] HCA 18
According to the facts of the case, the plaintiffs, Selig couple accepted the advice of Bertman
who was working as a representative of the defendant company Wealthsure Pty Ltd which is a
license holder of the Australian financial services. He recommended the Selig couple that they
can invest in the company in an unlisted company and they did so. After making the investment
it was revealed that they lost all their investment money.
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