Ethics & Governance
The fairness doctrine
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The implications of the recent Full Federal Court decision in ASIC v Westpac Securities Administration Limited [2019] FCAFC 187 (ASIC v Westpac) are far-reaching for the financial services industry.

The case is, of course, a significant development in the laws concerning the parameters of general advice and personal advice. However, the potential impact on the provision and regulation of financial services more broadly should be explored.

At its core, the judgment is a practical application of the 'six norms of conduct' set out by Commissioner Hayne in the Final Report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

In particular, the principles of fairness and the provision of services that are 'fit for purpose' are reflected in the Full Court's findings on personal advice and the obligation to act efficiently, honestly and fairly.

Ripple effect on financial services

This concept of fairness is transforming the nature of compliance in financial services, with the potential to have a ripple effect on product design, distribution and disclosure. Of particular note is the statement by Allsop CJ in the judgment that: "The [efficiently, honestly and fairly] provision is part of the statute's legislative policy to require social and commercial norms or standards of behaviour to be adhered to."

This observation demonstrates how the existing apparatus of financial services law in the Corporations Act 2001 (Corporations Act) can, and is likely to, evolve in line with 'community expectations'.

In this way, the fairness doctrine could give rise to a two-pronged test in the provision of financial services:

  • is the conduct compliant with the specific legal obligations set out in legislation and the general law
  • is the conduct consistent with the standard of fairness in the circumstances?
The inter-relationship of these prongs is illustrated in the ASIC v Westpac decision. This paper looks at the particulars of that decision.

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