Trade Practices Act changes make it easier for clients to sue planners
Recent changes to the Trade Practices Act and the Australian Securities and Investments Commission Act have made it easier for investors to claim restitution from planners, according to Sydney business law specialist Leigh Adams.
He said the changes to the two Acts “make a big difference in the entitlement of a client to make a claim against a financial planner”.
“It would serve advisers well in light of the recent collapse of Storm Financial as well as Timbercorp and Great Southern to be reminded that the changes leave them more exposed to a claim from clients.”
One of the most significant changes to the two Acts has been to extend the longstanding six-year limitation period for claims made under these Acts so that it expires six years from the date on which the advice was given.
While that still applies for claims under Contract Law the changes have now moved the limitation period to expire in six years from the date the loss or damage is suffered by a client.
“Planners used to hide behind this limitation period, but in a rising market it might be many years before the defect in the advice comes to light, and many clients used to become statute barred before they even knew they had a claim. The changes have taken this into consideration, Adams said.
Another key change is that lengthy contractual documentation effectively stating that clients are responsible for their investments no longer absolves an adviser from responsibility for faulty advice.
“They can no longer hide behind pages and pages and pages of their contractual agreements, which often purport to indemnify themselves from almost anything,” he said.
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