Chapter 7 of the Corporations Act 2001 (the Act) lays down provisions that deal with protection of the investors.

Investor protection is intended at safeguarding the investor’s interests against commission of fraud and various other economic offences. Section 761G of the Act distinguishes between retail and wholesale clients.

Modes of Protection of Investors- Regulation of Financial Product and Service Providers

The various kinds of general protection accorded as per the Act for both retail and wholesale investors include:

1. As per Section 1041E of the Act, any provider of financial product and services cannot make any false and misleading statements to an investor to influence him to apply for, dispose of or acquire financial products;

2. As per Section 1041F of the Act, any provider of financial product and services should not induce another person to deal in financial products by circulating false and deceptive material or intentionally suppressing material facts or information;

3. As per Section 1041G of the Act, a person must not act dishonestly in connection with transactions relating to financial services or products; and

4. As per Section 1041H of the Act, a person is prohibited from engaging in a misleading or deceptive conduct in relation to a financial service or a financial product.

These obligations should be mandatorily fulfilled and any breach may attract criminal prosecution. In cases where investors suffer loss or damage due to the breach of these obligations, they may seek to recover the loss from the person responsible for the infringement.
The level of disclosure required for a retail investor is much higher as per the Act. A retail investor is to be provided with a Financial Services Guide in relation to financial services as per Part 7.7 of the Act. As per Part 7.9 of the Act, a retail investor is required to be provided with a Product Disclosure Statement (“PDS”) in relation to financial products.
The rights of the investors provided under the Act are in addition to the rights available under other existing Commonwealth and State Legislations and Common Law.

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