Section 916 of the Corporation Act 2001

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Added on 2020-04-07

Section 916 of the Corporation Act 2001

Added on 2020-04-07

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Section 916 of the Corporation Act 2001_1

2ContentsASIC v NSG services Pty ltd (2017)...........................................................................................................3Introduction.................................................................................................................................................3Facts............................................................................................................................................................3The main contentions of Australian Securities and Investment Commission..............................................4Section 916 of the Corporation Act 2001 - Observations by the court.........................................................6Decision by the Court..................................................................................................................................7Reference List...........................................................................................................................................10

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3ASIC v NSG services Pty ltd (2017)Introduction The decision laid down by Federal court in the leading case of Australian Securities andInvestment Commission v NSG services pty ltd1 is a landmark case which was decided on 30thMarch 2017. The leading case establishes the civil penalty action that is taken byAustralianSecurities and Investment Commission for the violation of the ‘best interest duty’ establishedunder section 961 (B) of the Corporation Act 2001 and also in evaluating the nature of the ‘bestinterest duty’ that is imposed under the Corporation Act 2001.The decision is very significant from the point of view that the duty to act in the best interest isimposed upon the advisor who is providing advice to their retail clients. Facts Prior understating the basis upon which the decisions of laid down by the federal court, it is firstimportant to understand the background facts on the basis of which the preset case is raised. In 2012, there are two statutory changes that are brought in, that is, Corporations Amendment(Future of Financial Advice) Act 2012(Cth) and the Corporations Amendment (Further Futureof Financial Advice) Act 2012(Cth) which are considered as the Future of Financial Advicereforms2. The Corporations Amendment (Further Future of Financial Advice) Act 2012(Cth) isthe enactment that has established an obligation of ‘best interest’ under Part 7.7A, Division 2 oftheCorporations Act 2001(Cth).3Now, because of the said enactments, a duty of best interest is imposed upon the people whoprovide personal advice to its retail clients. The duty that is enshrined under Part 7.7A, Division2 of theCorporations Act 2001(Cth) (section 961 (1) & (2)), is not an exhaustive list and thereare various statutory duties that are incorporated in the same, for instance4:i.Section 961-B-F establish duty to act in the best interest of the client;1ASIC v NSG services Pty ltd (2017).2 Vrisakisand Zhou (2017) The Best Interests Duty: Process Or Outcomes? (online). Available at: <https://www.herbertsmithfreehills.com/latest-thinking/the-best-interests-duty-process-or-outcomes>. Accessed on 26thSeptember 2017. 3.ASIC (2017) ASIC v NSG services Pty ltd (2017)(online). Available at: http://download.asic.gov.au/media/4210761/17-100mr-asic-v-nsg-services.pdf. Accessed on 26th September 2017. 4 Section 961, Corporation Act 2001.

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Section 916 of the Corporation Act 2001