ASIC financial adviser exam, Conduct rules, breach reporting, DDO and AFCA question: listed hybrid security

ASIC examConduct rules, breach reporting, DDO and AFCA

Rosa, an authorised representative of Tidewell Advisory, tells Mr Kaur, 66, a retail client, that a listed hybrid security is 'capital guaranteed'. It is not. He invests A$40,000; the hybrid's price has not moved, so he has lost nothing. For breach reporting, Rosa's breach is BEST described as…

A not significant until a client suffers material loss from the statement
B not significant unless Rosa made similar statements to other clients as well
C not significant if Rosa corrects the statement in writing within 30 days
D deemed significant: it is misleading conduct about a financial product

Show the answer and explanation

Answer: D. deemed significant: it is misleading conduct about a financial product

Under s912D(4)(c) of the Corporations Act 2001 (compilation 19 Sep 2026), a breach of a core obligation constituted by a contravention of s1041H(1) (misleading or deceptive conduct about a financial product or service) is taken to be significant. Calling an unguaranteed hybrid 'capital guaranteed' is that conduct, so Tidewell has a reportable situation to report within 30 days (s912DAA(3)). Material loss is a separate deeming ground (s912D(4)(d)); it is not needed when another ground applies. The number of similar breaches is a factor under s912D(5), which matters only for breaches that are not deemed significant. Correcting the statement is good practice, but it does not undo the breach, and 30 days is the reporting deadline, not a cure period.

Common mistake

Loss is only one route to significance; misleading conduct is deemed significant even when nobody has lost money.

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