The Australian Securities and Investments Commission (ASIC) ordered Morgan Stanley Wealth Management Australia to amend a claim of independence that was deemed to be false, because it could unduly mislead consumers and investors.
According to ASIC, Morgan Stanley made the claim in a quote within an ASX announcement, in which it was described as providing an “independent advice offering”.
Under the Corporations Act, financial services businesses are banned from using the terms independent, unbiased and impartial unless they specifically do not receive commissions, payments or benefits, and operate free from any conflicts of interest.
But given the common usage of the term “independent” and the phrase “independently owned and operated” by SMEs and family-owned businesses of all industries, it raises the question of how “independence” is defined more broadly.
A spokesperson for the ACCC admitted that it is a difficult point to answer conclusively.
“‘Independent’ is a very broad claim, so any assessment of whether it may be misleading under the Australian Consumer Law depends on the context in which that term is used,” the spokesperson told My Business.
“Under the Australian Consumer Law, businesses are not allowed to make statements that are incorrect or likely to create a false impression.”
The ACCC referred to the example of homebuilder Aveling Homes, which was fined almost $400,000 for claiming online reviews were independent when the site was actually owned and operated by the business.
Asked if consumer laws need to be updated to provide greater clarity for businesses to abide by, Mr Keogh said that doing so is much easier said than done.
“One of the challenges that is always the case in this sort of situation is how do you define a black and white rule? If someone has been previously working for a business and then goes out and becomes a consultant and recommends that business, is that independent or not? How far do they have to be removed before it is independent?,” he said.
“They are the sorts of challenges that lawmakers have, and we have the evolving nature of the digital economy and how things that we are now talking about weren’t even considered, so trying to keep up with that in terms of the law is a challenge.”