The characteristics of accounts8 Assess the legal correctness of the statements made by GFC9 Conclusion10 Referencing11 Introduction This essay describes the case about relationship between customer GFC Bank, and financial planner, Jane. It discussion of the legal activities discussion involved in the case which combine d all relevant sources of law, legislation, common law and Industry Codes. Banking Law regulate the bank.In addition, it keeps right of customers. Task 1 APRA The purpose of the Banking Act 1959 (Cth) is to regulate Banking. APRA is the prudential regulator of banks. The Act provides for the prudential supervision and monitoring of banks by APRA, licensing by APRA of ‘authorised deposit-taking institutions’ (ADIs’) which include banks, credit unions, and building societies. Furthermore, the Act declares that any corporation which wants to do the business of banking may apply to APRA for the authority to do so: s 9. In addition, there are powers given to APRA which may be exercised for the protection of depositors.The articles ‘APRA warns banks over home loans’ and ‘APRA calls halt to riskier lending’ reflected role and powers of APRA. ‘APRA is not worried the local mortgage market is shaky, but it is concerned to ensure that mortgage are a larger proportion of the country’s banking system – riskier lending practices don’t become industry norms. ’ They also worry the lower overall growth in mortgage lending has led to overly aggressive competition. APRA supervises the deposit-taking institutions on anytime. If the bank approved too much loan, that will lead to a financial crisis, like the US crisis.In fact, APRA concerns riskier lending practices. The article mentions that APRA reiterated the need for appropriate pricing, adequate loan-to-valuation ratios, loan serviceability and other risk criteria. In addition, APRA also considers some factors: how price rises for housing are built into valuation models, loans to first-home buyers who may be carrying debt already, and whether the drive for market share is reflected in lower hurdles for potential borrowers. Operating under APRA ACT 1998 and powers derives from banking act 1959, insurance Act 1973, life insurance ACT, superannuation industry act 1993.One of the functions of APRA is to encourage and promote sound practice in relation to prudential matters: Banking Act 1959 (Cth) s 11B(b). APRA should collects and analyses information of prudential matters: s 11B(a). Furthermore, APRA is also required to evaluate the effectiveness and carrying out of practices related to prudential matters: s 11B(c). In addition, Section 11A of the Banking Act authorises the Regulations to require ADIs and authorised NOHCs to observe prudential standards specified. APRA is given power to develop prudential standards: s 11AF.It has released prudential standards, the ‘harmonised’ prudential standards that apply to all ADIs. There are five jurisdictions should be supervised by APRA. First of all, capital adequacy is of fundamental importance to ensure that an ADI has sufficient reserves to see it through times of difficulty. ARPA should consider four basic characteristics of an ADI’s capital. Second one is liquidity. According to APS 210, an ADI must inform APRA immediately of any concerns it has about its current or future liquidity. ADI must report its liquidity position to APRA on a quarterly basis.Thirdly, it is risk exposure. Fourthly, APRA should concern the relationship of banks to these other organisations. Last but not least, it is lending policies. AISC AISC is Australia’s corporate, markets and financial services regulator. It operates ASIC Act 1989 and Corporations Act 2001. AISC enforces and regulates company and financial services laws to protect consumers, investors and creditors. ASIC regulate Australian companies, financial markets, financial services organisations and professionals who deal and advise in investments, superannuation, insurance, deposit taking and credit.As the consumer credit regulator, they license and regulate people and business engaging in consumer credit activities, including banks, credit unions, finance companies, and mortgage and finance brokers. They ensure that licensees meet the standards, like their responsibilities to consumers: National Consumer Credit Protection Act 2009. As the financial services regulator, ASIC license and monitor financial services businesses to ensure that they operate efficiently, honestly and fairly. Task 2 Bank’s duties GFC as a bank, it has some duties to customer John.A customer is a person who opens and maintains an account with the bank, or buying some financial products in bank. In fact, john approaches GFC bank Ltd for savings and credit card facilities. When the banker agrees to open an account of customer, the relationship has been established between banker and customer. John has a saving account in GFC. The high Court of Australia in Croton v R  HCA 48 established the relationship between banker and customer is that debtor-creditor. GFC Bank is performance of its duty on deposit. GFC Bank should observe confidentiality and privacy (s 22).There is a term of the banker-customer contract: the banker is under a duty of secrecy in respect, at least, of the transactions which go through the account and any of the securities taken by the banker. The relevant case is Tournier v National Provincial & Union Bank of England  1 KB 461. In addition, the Privacy Act 1988 (Cth) applies to the handing of ‘personal information’. In this part, it will describe extent of the duty. Firstly, the logic of the judgments clearly extends to the financial institutions: see Tyree (1955).Secondly, it has been held that disclosure to a company which is part of a group to which the bank belongs may be a breach of the duty of confidentiality. Thirdly, the duty of confidentiality extends at the very least to all information came from account transaction. However, there are some reasons which bank can disclose information. Banks may be compelled to allow inspection and disclosure of the customer’s affairs. The various authorities are given by Corporations Act 2001 (Cth). Moreover GFC Bank should comply with customer’s mandate (instructions) in relation to customer’s cheque.GFC Bank should comply with legislation and industry codes. The Code of Banking Practice established the banking industry’ key commitments and obligations to its individual or small business customers on standards of practice, disclosure and principles of conduct for their banking services. The Code is not legislation, but the bank will adopt the Code, it becomes a binding agreement between customers and bank. In some respects the Code provides for situations not covered by the law and in others goes further than the law in providing rights and obligations.There are six parts of the Code: * Introduction; * Key commitments and general obligations; * Disclosure; * Principles of conduct; * Dispute resolution, monitoring and sanctions; and * Application and definition. In this case, john opened the accounts with GFC. Bank should disclosures the information to customer, John. The bank is obliged to provide to any person on request Terms and Conditions of ongoing banking services, information about fees and charges and interest rates.It will introduce disclosures of information below: * Terms (s 10) relevant to the banking service * Copies of documents (s 11) * Cost of credit (s 12) * Account operations (s 13) Furthermore, GFC Bank should comply with the Anti-money laundering and Counter-terrorism Financing legislation. Jane Seymour is a bank’s financial planner. She needs an Australian Financial Services Licence from ASIC, or being an ‘authorised representative’ of such licensee. An ‘authorised representative’ includes employees and agents of the financial service provider licensee: s912A.Jane also needs to: * Comply with certain statutory obligations to ensure their services are provided efficiently, honestly and fairly * Have in place arrangements for managing conflicts of interest * Make disclosure of certain information to their retail clients, e. g. Product Disclosure Statement, Financial Service Guide, or Statement of Advice. * Comply with other obligations in relation to handing their clients’ money and property, keeping records, lodging financial statements, managing conflicts of interest, and providing Alternative Dispute Resolution services to their retail clients: s 912A(1)Breach the Law In this case, Jane as a professional financial planner, she just suggests in an offhand manner that in the meantime John should deposit the inheritance into his savings account with GFC, and she recommend the client to do some high risk investments. According to ‘Financial Product’: s763(A)(1), Jane should manage a financial risk. However, she did not mention which there is any risk to her client, John. In addition, Australian Financial Services Licensees and their authorised representatives must comply with the FSR’s ‘Conduct of Business’ rules: Suitability Rule and Disclosure rule.Suitability Rule divides into two parts: know your client (KYC) and know your product (KYP). In the KYC part, financial product advice is treated as ‘personal advice’ only where the provider has considered the client’s objectives and financial situation and needs, or a reasonable person would expect the provider to have considered one or more of these matters: s 766B(3). The article touched on the main point. Jane has a conversation with her client, John revealed some information about his personal circumstances, meanwhile he says he has a stable job and expects to continue working for at least another 12 years.He hopes to do some overseas travel with his family in the near future. He did not mention he want to do high risk investment. As result Jane suggested her client to do high risk investment. She did not considered John’s objectives and financial situation and needs. According to s954A, the financial provider must determine the client’s relevant personal circumstance; make reasonable enquiries about those personal circumstances; give reasonable consideration to and investigation of those circumstances; provide appropriate advice. Jane did nothing with these points.Jane breached the legal obligations. There are three types of documentation of disclosure: Financial Services Guide (FSG), Product Disclosure Statement (PDG) and Statement of Advice (SOA). It must contain all information ‘that might reasonably be expected to have a material influence on the decision of reasonable person, as a retail client, whether to acquire that products’: s1013F. Jane did not remind her client what risk or benefits in this investment. She also ignored supply dispute resolution. In the part of disclosure, GFC Bank should provide information about services.The bank has responsible to provide to any person request Terms and Conditions, accessing copies of documents, cost of credit, operation of accounts, and account suitability. However, John did not receive any further information from GFC. Section 10 set off bank must supply terms and conditions. In addition, Section 11 regulates the provision of document copies. As result, GFC breach its legal obligation. ASIC is Australia’s corporate markets and financial services regulator. It will regulate GFC Bank. If customer is unhappy with the bank, John can find the financial Ombudsman Service (FOS).The FOS takes complaints on a wide range of financial services, including banking services. FOS dispute resolution services are free to consumers. The advantage of FOS is: free’ no lawyers need to be involved; and it is quick service compared with court system. The characteristics of accounts Saving account John has a saving account with GFC Bank. Savings accounts are accounts intended to help the customer save money. Savings accounts generally have limitations as to how often money can be removed each month. These accounts do not offer the ability to write cheques or to use a debit card.However, allow the account holder to use an ATM for cash out or to visit the bank to withdrawal money from customer’s account. In addition, savings account is in law a loan to the banker: Pearce v Creswick (1843) 2 Hare 286; 12 LJ Ch 251; Dixon v Bank of New South Wales (1896) 12 WN (NSW) 101; Akbar Khan v Attar Singh  2 ALL ER 545. Credit card account John also has a credit card with GFC. A card issued by a financial company giving the holder an option to borrow funds, usually a t point of sale. Credit card charge interest and are primarily used for short-term financing.Interest usually begins one month after a purchase is made and borrowing limits are pre-set according to the individual’s credit rating. Trust account John’s deceased uncle’s leaved an inheritance of $600,000 for him. That money is currently held in a trust account. A trust account is an account which is held by one party who is bound by law to exercise his or her rights over the account for the benefit of some other person or persons. The person who holds the account is known as the trustee and the person for whose benefit it is held is the beneficiary or cestui que trust.In addition, banker owes certain duties of care to the beneficiary, john. A breach of this duty, may result in the banker being held liable to the beneficiary. Meanwhile, a bank cannot be held liable to the beneficiaries unless it knows that the account is a trust account: Thomson v Clydesdale Bank Ltd  AC 282; Bank of New South Wales v Goulburn Valley Butter Co Pty Ltd  AC 543. When an account is headed ‘trust account’, there is little difficulty in fixing the banker with knowledge that the account is indeed a trust account.Moreover, trustee owes special duties such as obligations of good faith (to put beneficiary’s interests ahead of its own); avoidance of conflict of interest; and duty to account. Assess the legal correctness of the statements made by GFC Financial Ombudsman Service (FOS) provides independent and free dispute settlement process, independent of or outside the court system. In my option, john can find it to help him. There are two steps that FOS suggests customer to do: contact customers’ financial services provider; and lodge a dispute with them.In addition, AUSTRAC collects information and reports from banks (‘reporting entities’) and makes this information available to government investigators such as police and tax department. GFC has duty to report the transactions from trust account to savings account. Reporting of certain transactions to AUSTRAC under Financial Transaction Reports Act 1988 (Cth): * Significant cash transactions: >$10,000+ (deposit or withdrawal of cash) * Suspect transaction: any amount, and is suspicious because the bank believes it may relates to money-laundering ,tax evasion, or other criminal activity * Transfer internationallyJohn deposit $60,000 in saving account with GFC. As result, the bank should reporti it. Conclusion In conclusion, Banking law is a wide-ranging and constantly changing area of the law. GFC Bank has breached several obligations which may bring negative effects for its customer in this case. The bank should take full responsibilities for its customers.