Australia: Misleading or deceptive conduct - a warning in difficult times for financial services providers

In the course of what remains one of the most turbulent economic periods experienced, providers of financial services must remain vigilant when discussing, dissecting and analysing available market information and providing financial advice to clients.

The recent decision of Australian Securities and Investments Commission v Camelot Derivatives Pty Limited (In Liquidation) [2012] FCA 414 highlights the potential for allegations of misleading or deceptive conduct to be raised against financial service providers.

Justice Foster's judgment focused upon the key provisions that govern misleading or deceptive conduct in financial services, namely those contained within the Corporations Act 2001 (Cth) and the Australian Securities and Investments Commission Act 2001 (Cth) (ASIC Act).

Underwriters should bear these matters in mind when considering policy coverage issues or assessing the adequacy of the risk management strategies implemented by an insured.

The decision

Camelot Derivatives Pty Limited (In Liquidation) (Camelot) was the holder of an Australian Financial Services Licence and was in the business of providing financial product advice for certain classes of financial products, including derivatives.

Between March 2008 and October 2010, the primary business conducted by Camelot was advising, recommending and engaging in options trading investments on behalf of clients. Camelot promoted the trading on the basis that it used a strategy known as a 'condor' or an 'iron condor' in respect of the options available for trading. Camelot's managing director was heavily involved in the promotion of the trading scheme. He was involved in making statements that indicated that clients had earned, and could expect to earn, significant returns from options trading and that Camelot had experience implementing a successful strategy that generated significant returns from investments in an options trading market.

Unfortunately, during the March 2008 to October 2010 period, Camelot's clients suffered significant losses as a result of Camelot's trading activities. The clients complained to the Financial Ombudsman Service and to ASIC.

The complaints lodged with ASIC escalated, and examinations were conducted pursuant to section 19 of the ASIC Act. The investigations culminated in ASIC commencing proceedings against Camelot and its managing director, in which it was alleged that Camelot, under the direction of its managing director, induced its clients to trade in options so that excessive brokerage commissions could be charged. The commissions were allegedly excessive because they were unjustifiable if Camelot and its managing director had paid due regard to their clients' interests.

ASIC sought declarations that:

  1. Camelot and its managing director had both engaged in conduct that was misleading or deceptive, or was likely to mislead or deceive, in contravention of section 1041H of the Corporations Act and in contravention of section 12DA of the ASIC Act;
  2. they both contravened section 912A(1)(a) of the Corporations Act by failing to do all things necessary to ensure that they provided the financial services efficiently, honestly and fairly; and
  3. Camelot's managing director was liable as an accessory in respect of Camelot's contravening conduct.

Misleading or deceptive conduct

Whether conduct was likely to mislead or deceive was a question of fact, and Justice Foster explained that the conduct would be so characterised if it:

  1. led a person into error or induced or was capable of inducing error or leading to an erroneous assumption or misconception; and
  2. caused, or was likely to cause, a person to misinterpret, or be deluded as to, the relevant facts.

Conduct was likely to mislead or deceive if there was a real, but not remote, possibility of it doing so. It was not necessary, however, for the purposes of establishing liability under section 1041H(1) of the Corporations Act or section 12DA(1) of the ASIC Act to prove that the conduct in question actually deceived or misled anyone. Having said that, it was necessary to examine the course of conduct as a whole, taking into account relevant surrounding facts and circumstances and the context in which representations were made. The attributes of the target audience were also relevant and needed to be considered.

Justice Foster held that Camelot had engaged in misleading or deceptive conduct in contravention of section 1041H of the Corporations Act and section 12DA of the ASIC Act. His Honour was satisfied that Camelot's clients were induced by representations to the effect that they would make significant profits through options trading by taking the advice proffered by Camelot and using its 'condor' strategies.

Camelot's inducements and blandishments were misleading or deceptive or likely to mislead or deceive because they did not adequately explain the risks involved and did not make clear to prospective clients the potential for Camelot to make significant profits while its clients made significant losses.

Acting efficiently, honestly and fairly

As to the alleged contravention of section 912A(1)(A) of the Corporations Act, Justice Foster advised that the words 'efficiently, honestly and fairly', as used in the section, imposed a requirement of competence when providing advice and complying with relevant statutory obligations. The words also connoted an element of even handedness in dealing with clients and of sound ethical values and judgment in matters relevant to a client's affairs.

Further, the use of the word 'efficient' in the section indicated that a licensee's performance must produce the desired effect and be capable, competent and adequate. His Honour noted that inefficiency could be established by demonstrating that the performance of a licensee's functions fell short of the reasonable standard of performance that the public was entitled to expect.

Ultimately, Justice Foster held that the strategy adopted by Camelot and its managing director was not honest, in a commercial sense, and did not constitute the fair provision of financial services in accordance with section 912(1)(a) of the Corporations Act. Camelot was found to have failed to do all things necessary to ensure that the financial services it provided were provided efficiently, honestly and fairly.

Managing Director's liability

As to whether Camelot's managing director was liable as an accessory, Justice Foster noted that the mere making of representations on behalf of Camelot, without knowledge of their false or their misleading or deceptive qualities could not constitute the necessary involvement for the purposes of accessorial liability. Nothing less than actual knowledge of the essential facts constituting the contravention would suffice for a finding of liability against a person alleged to have been involved in the contravention.

However, because Camelot's managing director made all of the representations at the client seminars and drafted Camelot's promotional material, he was held liable as an accessory pursuant to section 1324 of the Corporations Act.

Important message

This decision reminds us that, regardless of the type of financial advice engagement that is established, the holder of an Australian Financial Services Licence must ensure that a representative's statements of fact or opinion are not motivated by a desire to maintain clients, increase trading volume or cause the value of a particular security to increase. Failure to do so could result in a claim being made, or trigger ASIC's interests.

From an insurance perspective, underwriters should ensure, particularly in these uncertain economic times, that an insured's programs are regularly reviewed so that responsible officers and representatives meet the designated standards of competency and relevant education qualifications and experience. Risk management strategies should also be updated to ensure that any statements made can be appropriately qualified or that there is clear disclosure of a lack of any reasonable grounds for any advice given.

Winner - EOWA Employer of Choice for Women Citation 2009, 2010 and 2011
Winner - Australasian Law Awards Gold Employer of Choice 2011
Finalist - ALB Australasian Law Awards 2008, 2010 and 2011 (Best Brisbane Firm)
Winner - BRW Client Choice Awards 2009 and 2010 - Best Australian Law Firm (revenue less than $50m)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.