Financial advisers can be taken to court for negligence for providing information to an investor on a product that fails instead of providing advice, according to a legal expert.
The common law duty extends to the provision of information as well as advice, Self-Managed Superannuation Fund Professionals' Association of Australia (SPAA) patron Anthony Mason said yesterday at the association's national conference in Brisbane.
"But the distinction between seeking information and advice will be critical in some cases, particularly cases where an experienced or sophisticated investor is seeking information rather than advice and making his own investment judgment on the basis of the information supplied," he said.
"In such a case, if there was no negligence in the provision of the information, then the adviser cannot be held responsible if the investment is a dud."
"Of course in some such cases the client may claim that he relied on the adviser's advice as well as information."
He also said an adviser who is remunerated by a product provider for recommending certain products is more vulnerable to a finding of negligence because a court or tribunal may conclude that the adviser put his own financial interest ahead of the client's.
"Here it is important to appreciate that the disclosure of the adviser's interest is not of itself an answer to a claim of negligence. Full disclosure may enable the adviser to retain the remuneration from the product provider but it does not avoid a claim for negligence as a watertight exclusion of liability would," he said.
