Law of investments and financial markets

331 Pages·2016·1.38 MB·English

by  Melissa Naylor, Elizabeth Shi (editor)

LAW OF INVESTMENTS AND FINANCIAL
MARKETS
Second Edition
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LAW OF INVESTMENTS
AND FINANCIAL
MARKETS
Second Edition
Melissa NAYLOR
LLM (Germany) LLB (Hons)
Compiled by
Elizabeth SHI
LLM(Monash)LLB(Hons)BSc(Melb)GradCertEducation(RMIT)
LecturerinLaw
RMITUniversity
LAWBOOKCO.2016
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PREFACE
LawofInvestmentsandFinancialMarketsstudiesthemanyandvariedareasoflaw
impacting investors and those working in the industries associated with
investment products. The focus of the early chapters is on the Corporations Act,
outlining in some detail the requirements associated with the provision of
financial services and financial product advice, including legal obligations and
compliance requirements of licensees and their representatives, disclosure,
dispute resolution and investor protection. The latest legislative changes and
proposals are discussed, as well as associated regulation and case law.
Later chapters concentrate on various forms of investment including managed
investments and direct investments into companies.
The main sources of law discussed in this book include:
• statutes — such as the Corporations Act 2001 (Cth); the Australian Securities and
Investments Commission Act 2001 (Cth) (ASIC Act); the Competition and Consumer Act
2010(Cth);
• commonlaw—includingthetortofnegligence,contractlawandfiduciaryduties;and
• regulation — primarily by the Australian Securities and Investments Commission
(ASIC)throughregulatoryguides.
This book attempts to provide most of the answers that a serious investor may
require on how the current law impacts upon their particular investments and
strategies. The book is also designed to assist the investment adviser to quickly
and accurately find the appropriate law that relates to their requirements.
Tertiary students of financial planning and finance law, as well as financial
planners,accountantsandlawyerspractisingininvestmentlaw,shouldalsofind
the book useful.
It has been my pleasure to update this book for a new second edition in 2016,
but this edition would not have been possible without the very significant
contributions made by Dr John McLaren and Mary Toohey in the previous
edition of this book and in prior editions of ‘Law of Investments’, on which this
book is based. Thanks must also go to Elizabeth Shi, who has provided helpful
guidance on her students’ areas of interest and comments on some chapters.
Acknowledgement must also be made of the late John William’s contribution to
the very first edition of Law of Investments. On a personal note, I dedicate this
book to Laura, Michael, Emma andAndrew.
Melissa Naylor
Brisbane
June 2016
v

TABLE OF CONTENTS
Preface.................................................................................................................................................v
TableofCases ...................................................................................................................................ix
TableofStatutes...............................................................................................................................xv
CHAPTER1—TheNatureofInvestinginaCompany.............................................1
CHAPTER2—Members'Rights.................................................................................17
CHAPTER3—FundingCompanyOperations ........................................................35
CHAPTER4—CorporateGovernance......................................................................65
CHAPTER5—CorporateInsolvency.......................................................................89
CHAPTER6—ManagedInvestmentSchemes.......................................................123
CHAPTER7—IntroductiontoInvestmentsandtheLaw...................................153
CHAPTER8—CommonLawFrameworkforMarketParticipants...................169
CHAPTER9—RegulationoftheFinancialServicesIndustry:
CorporationsAct,Chapter7 ............................................................181
CHAPTER10—ConductandDisclosureintheInvestmentAdvisory
Process................................................................................................213
CHAPTER11—InvestorProtectionandDisputeResolution...............................257
CHAPTER12—InsiderTrading:UsingInsideInformation.................................281
Index...............................................................................................................................................301
vii

TABLE OF CASES
A
A-G’sReference(No1)[1973]QB773.......................................................................... 12.60
ASICvCitigroupGlobalMarketsAustraliaPtyLtd(No4)[2007]FCA963.................8.90
ASICvOnlineInvestorsAdvantageInc[2005]QSC324............................................ 9.375
AdamsvPerpetualTrusteesAustraliaLtd[2006]SADC62........................................ 8.90
AirpeakPtyLtdvJetstreamLtd(1997)73FCR161;15ACLC715.................................2.310
AlivHartleyPoyntonLtd[2002]VSC113............................................................ 8.70,11.80
AmadioPtyLtdvHenderson(1998)81FCR149......................................................... 6.210
AmpolPetroluemLtdvRWMiller(Holdings)Ltd[1972]2NSWLR850...........3.80,3.140
AmpolexLtdvPerpetualTrusteeTradingCo(Canberra)Ltd(1996)40NSWLR
12............................................................................................................................. 12.150
AstleyvAustrustLimited(1999)197CLR1...................................................................8.80
AustralianCompetitionandConsumerCommissionvAustralianSecuritiesand
InvestmentsCommission(2000)174ALR688...................................................... 5.720
AustralianSecurities&InvestmentsCommissionvPrimelifeCorporation
Limited[2006]FCA1072...........................................................................................6.40
AustralianSecurities&InvestmentsCommissionvTakaranPtyLtd(2002)43
ACSR46;[2002]NSWSC834................................................................................... 6.40
AustralianSecuritiesCommissionvGallagher(1993)11WAR105;(1993)10
ASCR43;(1993)11ACLC286................................................................................... 4.310
AustralianSecuritiesandInvestmentsCommissionvCashStorePtyLtd(inliq)
[2014]FCA926.........................................................................................................11.110
AustralianSecuritiesandInvestmentsCommissionvHellicar[2012]HCA17............4.310
AustralianSecuritiesandInvestmentsCommissionvMacdonald(No11)
[2009]NSWSC287.................................................................................................. 4.310
AustralianSecuritiesandInvestmentsCommissionvMacdonald(No12)
[2009]NSWSC714................................................................................................... 4.310
AustralianSecuritiesandInvestmentsCommissionvMaxwell(No11)[2009]
NSWSC287.............................................................................................................. 4.310
AustralianSecuritiesandInvestmentsCommissionvOxfordInvestments
(Tasmania)PtyLtd(2008)169FCR522..................................................................9.375
AustralianSecuritiesandInvestmentsCommissionvSouthcorpLtd(2003)130
FCR406.......................................................................................................12.130,12.180
AustralianSecuritiesandInvestmentsCommissionvWellingtonCapital
Limited[2013]FCAFC52.......................................................................................... 6.110
AutomaticSelf-CleansingFilterSyndicateCoLtdvCunninghame[1906]2Ch
34......................................................................................................................1.130,4.10
AvocaConsultantsPtyLtdvMillennium3FinancialServicesPtyLtd[2009]
FCA883................................................................................................................... 11.130
B
BakervPalmBayIslandResortPtyLtd(No2)[1970]QdR210.................................4.180
BoardmanvPhipps[1967]2AC46..............................................................................4.180
BolkiahvKPMG[1998]UKHL52................................................................................ 12.160
BreenvWilliams(1996)186CLR71...............................................................................8.90
BrookfieldMultiplexLtdvInternationalLitigationFundingPartnersPteLtd
(No3)(2009)FCA450;256ALR427........................................................................6.50
BrunninghausenvGlavanics(1999)46NSWLR538...................................................4.140
BurlandvEarle[1902]AC83................................................................................ 2.90,3.80
ix
LawofInvestmentsandFinancialMarkets
C
CapitalFinanceAustraliaLimitedvClough[2015]NSWSC1327.................................3.370
ChanvZacharia(1984)154CLR178............................................................................. 4.180
ChewInvestmentPtyLtdvGeneralCorpofAustraliaLtd(1998)6ACLC87........... 2.300
ChryslerCreditCanadaLtdvMVLLeasingLtd(1993)5PPSAC(2d)92.....................3.410
ChurchillInternationalIncvBTRNylexLtd(1991)4ACSR693................................... 2.60
CityEquitableFireInsuranceCompanyLtd,InRe[1925]Ch407.............................. 4.100
CommercialBankofAustraliaLtdvAmadio(1983)151CLR447;46ALR402....... 10.200,
11.110
CommonwealthBankofAustraliavFriedrich(1991)5ACSR115............................... 4.100
CookvDeeks[1916]AC554......................................................................................... 2.250
Cook’sConstructionPtyLtdvBrown(2004)49ACSR62......................................... 5.530
CresvaleFarEastLtd(inliq)vCresvaleSecuritiesLtd[No2](2001)39ACSR
622............................................................................................................................5.180
CrocombevPineForestsofAustraliaPtyLtd[2005]NSWSC151............................... 6.40
D
DalkeithInvestmentsPtyLtd,Re(1985)3ACLC74................................................... 2.250
DalyvSydneyStockExchangeLtd(1986)160CLR371..................................... 8.90,11.60
DanielsvAnderson(1995)37NSWLR438........................................................ 4.110,4.220
Dawson(deceased),Re[1966]2NSWR211................................................................. 4.80
DelmenicovBrannelly[2008]QCA74.......................................................................... 8.70
DemondrilleNomineesPtyLtdvShirlaw(1997)15ACLC1716.................................. 5.500
DonoghuevStevenson[1932]AC562.................................................................8.60,8.70
E
EbrahimivWestbourneGalleries[1973]AC360.........................................................2.280
EldersForestryManagementLtd,Re(2012)30ACLC12-032..................................... 6.130
EricPrestonPtyLtdvEurozSecuritiesLimited[2010]FCA97....................................8.90
F
FinancialIndustryComplaintsServiceLtdvDeakinFinancialServicesPtyLtd
(2006)157FCR229;[2006]FCA1805....................................................................11.200
FitzsimmonsvTheQueen(1997)23ACSR355........................................................... 4.180
ForrestvAustralianSecuritiesandInvestmentsCommission[2012]HCA39........... 4.315
FossvHarbottle(1843)67ER189............................................................................... 2.320
FrancisvUnitedJerseyBank432A2d814(NJ1981).................................................. 4.110
FraservNRMAHoldingsLtd(1995)55FCR452;13ACLC132.....................................3.180
G
GJeffrey(MensStore)PtyLtd(1984)2ACLC421...................................................... 2.250
GambottovWCPLtd(1995)182CLR432....................................................................2.230
GemstoneCorpofAustLtdvGrasso(1994)62SASR239......................................... 4.180
GermanDateCoffeeCompany,Re(1882)20ChD169.............................................. 2.280
GrandEnterprisesPtyLtdvAuriumResourcesLtd[2009]FCA513..........................4.230
GreenvBestobellIndustriesPtyLtd[1982]WAR1.................................................... 4.180
GunnsFinanceLimited(inliq)(recs&mgrsapptd)(No2),Re[2013]VSC365;
(2013)281FLR121..................................................................................................... 6.110
GyevMcIntyre(1991)171CLR609.............................................................................. 5.620
x