Most probably do. There is a common fallacy in the investment industry that only financial planners give personal advice. That’s simply not true! The law defines personal advice broadly: all you need to do is take into account one of your client’s objectives, financial situation or needs and you’ve given personal advice. And there is […]
If you have ever wondered whether you need an Australian financial services licence (AFSL) if you operate a financial services business in Australia but all your clients are overseas, then the answer is ‘yes’.
In Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd, the court held that an Australian-based investment manager with one off-shore client was operating a financial services business ‘in this jurisdiction’ and so required an AFSL.
Woodlawn Capital was an investment manager which entered into an investment management agreement (IMA) with Motor Vehicles Insurance Ltd (MVIL), a government-owned entity incorporated and operating in Papua New Guinea.
Under the IMA, Woodlawn agreed to invest MVIL’s funds in accordance with a nominated ‘Investment Mandate’. MVIL was Woodlawn’s only client.
Over a period of time, the initial capital invested of approximately $A43 million reduced in value to $A30 million. MVIL terminated the IMA and sought compensation for fees on the basis that Woodlawn did not hold an AFSL.
Woodlawn contended that it was not required to have an AFSL because it did not provide financial services in this jurisdiction. This was rejected by the court.
The court said the question is not where Woodlawn supplied services to its client, MVIL, but where Woodlawn carried on the financial services business. The court said it was clear that Woodlawn carried on its ‘financial services business’ in Australia because it bought and sold securities and derivatives in Australia (which were largely Australian instruments), Woodlawn’s offices were located in Australia and it conducted its business in Australia.
Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd – NSW Caselaw.
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