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Investments and Financial Markets Exam

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Part One comprises five short answer questions, each worth 4 marks each. There is a total of 20 marks available for Part One. Please answer each question separately.


Select a news article, posted during 2021, which relates to an area of law covered in the course. You could consider articles relating to: investing in companies, issuing a prospectus, debt and equity financing, shareholder rights and remedies, insolvency regimes, real property, disclosures and duties relating to financial products and services; managed investment schemes; or superannuation. Address the following:

Include a link to the article, stating the posting date, news forum, and author (if stated);

  • Explain the applicable law to be applied to this situation, or news update? What relevance or impact does this article, or the issues that it raises, have with regard to financial or investments law?

(4 marks)


With specific reference to Australian policy and law/s, explain the purpose of the ‘Superannuation Guarantee’.

  • What is your opinion of the position of the law and its obligations now, and of expected changes in the future?                                                                                                                                                                    (4 marks)


With specific reference to the law, please answer the following question:

  • What is the difference between a breach of contract (such as a written or oral client engagement) and a breach of a tortious law? Are these the same legal concepts? Use an example to support your explanation which relates to the financial industry.                                                                            (4 marks)


With specific reference to the law, please answer the following question:

  • Explain the purpose of a ‘Deed of Company Arrangement’. What is it and when would such an arrangement be put into place? When would such an arrangement note be considered? In your opinion, is this regime being used more or less as a result of the economic impact of the COVID pandemic?(4 marks


With specific reference to the law, please answer the following questions:

  • In relation to Managed Investment Schemes, what is the purpose of a
    ‘Responsible Entity’ and why must there be a ‘Compliance plan’ in place? In your opinion, do you think this is excessive regulation?
  • Provide an example of a MIS which supports your statements. (include a URL)                                                                                                                       (4 marks)

Part One: Total of 20 marks


Part Two comprises two scenario based questions, each with 2 questions worth 7.5 marks each (so 15 marks + 15 marks). There is a total of 30 marks available for Part Two. Please answer each question separately.


Your name is Steve, and you are a financial adviser employed by ‘Trimp Money’. You are keen to maintain a solid book of clients.

Mitch is a potential new client that has come to you for advice. He arrives on time. He explains that he holds $86,000 worth of ordinary shares in a failing Australian listed company called ‘Popcorn Ltd’ which used to operate hundreds of movie rental franchises. Most stores have since been sold or closed. Mitch is concerned at recent media reports explaining the directors are using something called ‘safe harbour provisions’ because of mounting debts. The last update shows the shares were 41 cents each. He shows you an article explaining the company has been placed into voluntarily administration. It appears the company owes AUD $35 million to fixed and unsecured creditors and owns AUD $4.9 million in assets (mainly through real estate holdings). The reason for Mitch booking a meeting is that he wants to cut and run, and is having trouble selling these shares. He wants to know what will happen to his shares if the company falls into liquidation before he can offload them. You explain you will put together some advice explaining his situation and will email him later in the week.

Ibanka walks into Trimp Money and explains she has inherited $2.1million and would like to invest. She is an existing client and arranges an appointment that day with you. You ask Ibanka a series of questions. She explains she is 32, and is worried about the economy and politics. She has $AUD 1 million dollars in a cash account and lives an extravagant life. She is not employed but receives a monthly trust fund dividend of $75,000. She does not have a savings regime, spends all her incomings and has a $117,000 credit card debt. She fears she may soon have to move town if her husband loses his job (he works for her father). She wants to maintain her lifestyle until she is old and no longer on Instagram. You discuss various investment schemes and promise to send her some information.

You have had a really bad day at work, have terrible hayfever and feel a migraine coming on. You recall the bad days of quarantine and dusty carpets. You are in the queue at the pharmacy and have your coat over your pyjamas. You hope nobody will notice! You see Ibanka who starts explains she has been thinking over the information discussed that day, and has heard from a friend about a pooled investment into a Russian themed shopping centre in Melbourne. You aren’t really listening and are annoyed at being accosted at night. Dismissively you say “that sounds odd, I wish you all the best”.

Three months later, you receive a notification from management that they have received a complaint from representatives of a client called Ibanka, claiming you encouraged her to invest in an unregistered managed investment scheme. She has lost $AUD 1.3 million dollars and is claiming you were negligent. You have trouble remembering that day.


With specific reference to the law, please answer the following question:

  • What information will you put into your advice for Mitch? What obligations must you be aware of?

(7.5 marks)


With specific reference to the law, please answer the following question:

  • Do you believe that Ibanka has a valid claim against the bank and/or you for a claim under the common law? Do any valid defences apply?

(7.5 marks)


It is now four years later, and you are in a partnership with three colleagues. You are still a financial adviser but business is rocky. You are all working hard, but profits are low and the outgoings, such as rent, are becoming burdensome.  

Tiffany, a client, asks you for advice regarding the purchase of two off-the-plan apartments in a high rise building called ‘MAGA Apartments’ for the purpose of investment through trust. Apartments are worth AUD $630,000 each, which is exactly half the amount that is in her self-managed super fund! Tiffany is 21, but is wanting to retire soon. She is thinking of withdrawing half of her super as a lump sum to pay for one apartment, and liquidating all of her share portfolio to pay for the second apartment. Her father, who contributed to these assets, is fully supportive. Her other asset is her home which she owns, worth $1,400,000. You proclaim that this is a wise investment strategy, and advise her to proceed.

Wanting to avoid another ‘Ibanka’ incident, you present her with a retainer agreement containing a provision stating your firm “will not be liable for negligence or any loss, howsoever caused, as a result of advice or services provided”. You explain that the contract overrides any consumer law protections, which are in place for people without written agreements. Tiffany signs the retainer, and transfers over $1,000,000 to the firm, to enable the sale of both apartments.  This is great for a number of reasons.

One partner, Eric (a real estate agent turned developer), is the developer of the complex which is being built in stages. Eric is worried about slow sales, which is preventing him from paying for the completion of the project. He is also concerned that cracks are appearing in some completed units. You both have a discussion, and agree to use half of Tiffany’s money to fund the completion of the project. Around this time, Eric has s discussion with Tiffany over the phone when you are out of the office, explaining the advantages to Tiffany in her accessing all available assets. Soon after, one apartment is purchased immediately for her. You explain that paperwork will be along in two months for the second apartment.

Unfortunately, the partnership is not able to recover and the money can’t be raised to buy the second apartment. The partnership is dissolved. Tiffany commences legal proceedings soon after against you, and the partnership.


With reference to the law, please address the following questions:

  • As a financial adviser, can Steve give advice about investing in real property? What about Eric?
  • What duties and obligations do Steve owe to Tiffany in this transaction?           

(7.5 marks)


With reference to the law, please address the following questions:

  • Does the agreement between Steve and Tiffany, and his subsequent conduct, invoke any relevant provisions from the industry code of conduct? If so, is this binding on Steve?
  • Is Steve able to temporarily use the money transferred to him on trust by Tiffany, given that he is investing it in real property and not a financial product? Why or why not?

(7.5 marks)

Part Two: Total of 30 marks


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