Law of Finance Essay Example

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Law of Finance

1. Is John providing a financial service? What is the relevant law and how would this apply to the facts of this problem?

John is considered to be providing a financial service since he issues interests in an investment engagement scheme, which he also happens to have registered with the Australian Securities & Investments Commission (ASIC). Under the Australian law, there are a number of business circumstances that are regarded as financial services. These circumstances include: provision of financial product advice on the purchase of a particular investment scheme, creation of a market for financial products, dealing in a financial product, and provision of traditional trustee organization services or custodial depository services (Leow, Murphy, & Hooper, 2009). John’s involvement in the issuance of interests falls in the first category of provision of financial product services, and so, he is indeed providing a financial service.

John’s engagement in the provision of financial services is controlled by the Corporations Act of 2011, via Section 911A of the law. This law requires that a person should have an Australian Financial Service License (AFSL) before he engages in the provision of a financial service. The law also requires that people providing financial services adhere to a disqualification or banning order under Division 8 of the same Act (Leow, Murphy, & Hooper, 2009). This implies that John has violated the Corporations Act of 2011 as he provides a financial service without an AFSL certification.

2. Is John carrying on a financial services business? What is the relevant law and how would this apply here?

John’s involvement in the issuance of interests does not translate into a financial services business. A person, under Australian Law, is considered to carry on a financial business, if: he/she has a place of business in the country, uses or establishes a share registration office or share transfer office, and if he/she manages, deals with, or administers property situated in the country as a legal personal trustee or representative, or as an agent (Leow, Murphy, & Hooper, 2009). John neither has a share registration office or share transfer office, nor is he an agent or legal representative for any established AFSL licensee. Consequently, John does not run a financial services business in his current state.

The Corporations Act of 2001 is the law governing all financial services businesses that are conducted in Australia. The law requires that anybody, who carries out a financial services business in the country, should apply for an AFSL license. However, a person carrying on a financial services business may be exempted from holding an AFSL if he is offering the financial services as a representative of an AFSL licensee (Leow, Murphy, & Hooper, 2009).

3. Does John need to obtain an Australian Financial Services Licence (AFSL)? If so, what would be the three most important obligations he will need to meet in the circumstances of this case?

An AFSL is an important document for any person or company that intends to carry on a financial services business in Australia. The license is an indication that the company or person undertaking a financial business in the country is a responsible, law abiding entity (Leow, Murphy, & Hooper, 2009). It would be advisable that a party like John obtains an AFS License, so that he can continue providing financial services to his clients without breaking the Corporations Act of 2011.

There are a number of obligations that John needs to meet before he is issued with an AFS License. Firstly, John is required to put proper procedures in place for training his representatives. Secondly, John is required to install compliance measures in place to ensure that he complies adequately with the relevant law before obtaining the license needed. Lastly, he would be needed to lay down strategies for carrying on with insurance and dispute resolutions. The three obligations are meant to ensure that financial services businesses operate within the law, so that they can be held legally responsible for their services by their clients and other relevant parties (Leow, Murphy, & Hooper, 2009).


Leow, J., Murphy, S., & Hooper, G. (2009). Australian master superannuation guide 2012/2011. North Ryde, NSW: CCH Australia.