Australia: Selling Tips

Ensure your representatives, including authorised representatives, who give advice to clients about your projects, act within the scope of their authorisations and have the appropriate qualifications and experience, such as PS 146 training. These requirements form an important part of the obligation of licensees to monitor, supervise and train their representatives.

Financial product advisers are familiar with the ‘know your client’ rule, whereby a licensee (or its representative) is only permitted to provide personal advice to a retail client after first determining the personal circumstances of the client and making reasonable enquiries in relation to those circumstances. The advising party must be satisfied that, given the client’s own circumstances, the advice will be appropriate.

However, it is equally important to ‘know your product’. Representatives must thoroughly understand the nature of your project on offer in order to make a reasonable recommendation about the project to clients. For example, representatives giving advice must understand how your project works, the fees and costs associated with it, and have read your product disclosure statement (PDS).

If you are an external representative marketing products promoted by other organisations, then you have a responsibility to analyse and research the product. For authorised representatives (both corporate and individual), this could mean going outside the PDS and compiling an independent due diligence file. For example, there is some opinion that in the recent Westpoint case, adviser groups will be liable for the advice given on Westpoint products even though those products were on the recommended list of the dealer group for whom the adviser was acting. Independent research on a product by authorised representatives will help to mitigate this liability risk.

Marketing material such as newsletters, brochures, flyers and other promotional tools must comply with the rules about knowing your product and, if personal advice is given, knowing your client. Licensees can do this by recognising the limitations of broad based marketing in the text of the promotional material. For example, invariably all marketing material should contain the general advice warning under the Act, e.g., state it does not address the needs of any particular investment and advice should be obtained by individuals before they make a decision to invest in your project, identify you as the product issuer and state where a copy of the PDS can be obtained. This will include references to the PDS being available on a website or contact and address details for the company. Depending on the advertising medium, there are some exemptions from citing the full general advice warning in every circumstance.

Ensure your website information is current, and that you review your websites on a regular basis. It is always disconcerting when reviewing the site of any supplier to read words like "Last updated: 15 February 2005". Therefore, licensees should ensure that if former disclosure documents are retained on the website, then it must be clear as to whether or not the offers to which those disclosure documents relate have been closed. For any closed offers, the website must state those disclosure documents are retained for information purposes only, or, better still, remove them from the site.

To reduce the risk of liability in the event a client alleges loss suffered from incorrect financial product advice, representatives must keep accurate and sufficient records about the advice given to clients, for the time required by the Act, i.e., generally seven years from the date the advice is provided. Examples of records to keep can include the following, depending on your specific licence authorisations:

We are sometimes asked whether applications forms lodged by fax are acceptable. The short answer is, yes. However, the Act makes it incumbent on responsible entities to only issue units where the application for those units was made on an application form included in, or accompanied by, a valid PDS given to the prospective investor, or which was copied or directly derived by that investor from such a form. Accordingly, you need to be certain the faxed application form was ultimately taken or copied from your PDS by the person lodging the application.