Question

Stock exchange and financial law - Australia

Nellie McQuerkin has met with Nigel Nomoney who is a financial advisor. She has recently inherited a large sum of money from her brother and wishes to have it invested. Nellie tells Nigel that as she is retiring from her career as a professional Tidleywinks player due to arthritis in her fingers, and as such, this will be her only source of income for the future so it is very important that the money is invested cautiously and in stable safe investments.

Nigel is very kind, patient and spends much time with Nellie going over her options. He suggests that she invest half of the money in Brownout Ltd. Nigel tells Nellie that Brownout is an energy company negotiating a lucrative green energy deal and so would be a good investment. Nigel also suggest that Nellie invests a quarter of the money in Flubber Pty Ltd (a rubber producer) and a quarter of the money in Smith’s Pty Ltd (a high-end retailer).

It has now been two years since Nigel has invested Nellie’s money and Nellie is very unhappy. She comes to seek advice from you and tells you the following:

•       The investments have lost Nellie a significant sum of money

•     Nellie has discovered that Smith’s shares had dropped significantly in value at the time when Nigel invested her money and that they continued to fall in value following her investment. This was due to lawsuits brought against Smith’s in negligence for the distribution of faulty children's toys.

•     Nellie has heard through a mutual acquaintance that Nigel receives commission from Flubber Pty Ltd for each of his clients that invests in the company.

•      Nigel also did not send Nellie any fee disclosure statements, or any renewal notices however seems to be charging

her fees.

Advise Nellie as to the possible causes of action against Nigel. Refer to relevant legislation and case law in your answer.

Answer 1

The afore-said case can be analysed as below:

Parties to the Case - Nellie Vs Nigel

Facts of the Case - Nellie has invested the savings as per the direction given by Nigel. But, the amount invested was misutilised by Nellie.

Applicable Legal Provisions:

1.The provided case says Breach of Contract betweeen Nellie and Nigel.

2. This is a clear case of Money Laundering by Nigel.

3. Hence, Nellie can institute legal action against Nigel as per the Australian Stock Exchange and Securities Law.

4. Nigel is liable to Nellie as it is an invalidation of finance contract.

5. In Australia Securities Laws, Nigel has to refund the amount mis-utilised along wiht the penalty (compensation) to Nellie as per the case decided by the Australian Court of Law, provided as per the Australian Securities and Investments Commission Act, 2001.

Conclusion:

There is a breach of conduct and Nigel is liable to Nellie. The applicable case law is Australian Securities and Investments Commission v King (2020)