I’m in Financial Services, but why do I need a Financial Services Lawyer?

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Grant Holley Previously a Partner & Co-Founder at Holley Nethercote Linkedin

If you’re lucky, you haven’t needed the services of a lawyer much.  You’ve managed to stay clear of conflict.  Or if not, you’ve sorted it out without fronting a court or tribunal.

If you’ve needed a lawyer, it’s been to buy or sell a house, or maybe a business, to make a will or have powers of attorney drawn up.

What do Financial Services Lawyers do?

Anyone familiar with the financial services sector knows that it is heavily regulated.  The ‘financial services laws’ are many and complex.  Wading your way through them is akin to living ‘the Da Vinci Code’; following a line of clues with peril at every step.

Even the Courts struggle with the financial services laws.  Federal Court Judge, Mr. Justice Graeme, summed it up pretty well in the case of Ku v Song:

“Whoever coined the expression ‘as clear as mud’ must have been slaving over the extraordinarily, and unnecessarily, complex provisions of the Corporations Act and the Corporations Regulations relating to share transfers at the time…it [finding the law on share transfer] requires hours of study, reference to numerous sections and regulations, which themselves make no sense without reference to numerous definitions, often shrouded in obfuscation and…strewn through the Corporations Act and Corporations Regulation… Why the law had to be expressed in such an obscure way beggars belief.”

AND THAT WAS AFTER the Corporations Law Economic Reform Program which was intended to simplify the law!

Winston Churchill once famously said  – “Democracy is the worst form of government, except for all the others that have been tried.”

The same could be said of our legal system.  It is far from perfect.  That said, the system works (sort of) and if you look for a competent business lawyer to help you with the law, comply with laws relating to employment, trade practices, buy or sell your business, and so on, you are very likely to find a competent general practitioner.

If you are conducting a business in the financial services sector, however, there are trips and traps that a lawyer not practising in the area may simply not know about; things that defy common sense.  For example, when a financial adviser has provided advice to a client, which has been properly documented, and then has a chat over the phone with a client, during which the adviser gives some further advice, it would be a good idea to keep a file note of that advice.  Common sense right?   I’ve just stated that common sense idea in three lines in a way that most readers would say – “that’s obvious, I do that”.

The Act turns that common-sense action into a legal obligation by s946B, which has 9 subsections and occupies two pages of close typed, small font, words.  But wait, there’s more!  Regulation 7.7.10AE says to disregard the s946B in the Act and replace it with the information set out in the regulation.  But wait, there’s more!  That regulation modified the section from December, 2005.  However, if we look back at the section in the Act, as it stands today, we see that sub-sections 7, 8 and 9 have been enacted since December, 2005 and became effective in June, 2007.  So, we have to look at the Regulation for sections 1 to 6, and the Act for sections 7 to 9.   The regulations are a different publication to the Act.

The point is this.  Lawyers that don’t practice in the area, cannot reasonably be expected to know this.  Why would they?  If they were very careful they might find the law, but it will take them time, and that means money.

I have used that example relevant to the financial advice industry to illustrate the point.  The financial services sector itself is broad.  Similar challenges exist in other parts of the financial services sector.  Whether you are running a digital trading platform, managed fund, a superannuation fund, a consumer credit business or a payments business, the laws that apply to you are complex and the regulators’ expectations high.  Penalties are potentially large and community expectations high following the Royal Commission into misconduct in the financial services sector.  You need lawyers who are well versed in financial services law and experienced in your industry.  And yes, I would say that, wouldn’t I! (Did I mention the obligation to manage conflicts of interest?)

What services do financial services lawyers provide?

The types of services that financial services lawyers provide include the following:

  • Advice on whether you require an Australian Financial Services licence (AFSL) and, if so, what type, and what authorisations are required and helping with the required application/s;
  • What regulatory obligations you must comply with, under which Acts, and what regulators you need to engage with;
  • Assisting with drafting the business’s processes and procedures to help ensure the business complies with those obligations;
  • Helping you handle breaches within the business in a way the law requires, and the regulators expect;
  • Helping you deal with complaints made to the Australian Financial Complaints Authority (AFCA);
  • Helping you if ASIC or another regulator, such as AUSTRAC (Money Laundering) or the OAIC (Privacy complaints) comes a calling.  This can be in the form of a letter, a phone call or an investigation;
  • Buying and selling your financial services business;
  • Advising on business structuring issues and the licensing implications;
  • Drafting documents like fund constitutions, trust deeds and Product Disclosure Statements (PDS); and
  • Providing advice on whether your existing arrangements and practices comply with your legal obligations (Licensee Reviews).

Often a financial services law firm will also have general business law knowledge and experience and can assist with drafting of employment contracts, outsourcing agreements and the like.

Which lawyer?  How do I know if a lawyer is good?

There are those that believe most people are good and well-motivated.  There are others that start from the opposite premise and work from there.  Neither is right or wrong.  It’s a personality thing.   I’m in the former camp.  I think that applies to lawyers as much as it does to most other lines of work.  Assuming competence in your industry, the best lawyer for you is the one you get on with, the one you trust and communicate well with.

The expression ‘on time and on budget’ (‘the promise’) is easy to say.  Anyone with a business offering will know that the success of the business largely depends on delivering on that promise.  Its achievement is harder than its articulation.  There are so many factors at play, many of them out of the control of the provider or the client.  This is particularly the case with new ideas involving new technologies and regulators who have a consumer protection role.  A good relationship with your service provider assists efficient communications and helps to achieve the promise.  When the promise is not met, the management of expectations and the trust between client and the provider need to be robust enough to move on productively.

So, the right financial services lawyer, or firm, for you is the one that you can have that sort of relationship with.  Often it comes down to particular personalities.  A depth of expertise in the firm is also an advantage.  If the individual lawyer has colleagues with particular expertise within the firm, they can access this for your benefit.

Fortunately, the market for legal services, including in financial services, is competitive.  Obtain referrals and do your homework.  There is no shortage of qualified financial services lawyers out there.

If you’re looking for an experienced financial services lawyer, get in touch with our team.  We have lawyers in our Melbourne and Sydney offices, who have an array of skills and experience that stem from previously working in-house at some of Australia’s largest law firms, financial institutions and regulators.

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Author: Grant Holley (Partner)