Financial Markets Conduct Act 2013 and fair dealing
What this domain tests
Fair dealing under the FMC Act is enforceable conduct law, not a set of marketing preferences. Expect questions on misleading conduct, false representations, market manipulation, and insider trading in dealer communications and trading.
Core prohibitions
Part 2 of the FMC Act prohibits, in connection with financial products or financial services, misleading or deceptive conduct, false or misleading representations, and conduct that creates a false or misleading impression. The prohibitions apply broadly to statements, advertisements, projections, and omissions where silence is misleading. Intent is not required; the test is the effect on a reasonable person. The Act also prohibits market manipulation, including false trades, wash trades, and artificial price effects, and insider trading. Inside information must not be traded on or disclosed outside permitted channels, and dealers must maintain information barriers.
Disclosure and representations
A dealer must ensure client communications, quotes, and marketing are balanced and not misleading. Stating a return is guaranteed when it is not, or omitting material risk, can breach fair dealing even if the client is sophisticated. Forecasts must have a reasonable basis, and hypothetical performance must be labelled.
Worked example
A dealer emails retail clients: Capital guaranteed bond, 12% p.a., no risk. The bond is unsecured and the 12% depends on an index. This is misleading conduct and a false representation. The correction is not merely a footnote: the headline claim must be withdrawn, clients contacted, and the communication recorded.
Traps
Believing puffery excuses all exaggeration. Thinking written disclaimers cure a misleading headline. Assuming fair dealing applies only to securities; it applies to financial products and services. Overlooking that silence can mislead.