Circular 1996/6: Duty of care in relation to provision of financial advice

Purpose

The purpose of this circular is to provide you with further material on the principle of the duty of care contained in the Guidelines on Official Conduct of Commonwealth Public Servants (1995 edition), as the principle applies to the provision of financial advice. When the Guidelines are next revised, the contents of this circular will be incorporated.

Background

This material was circulated in draft form in April and, following discussions between agencies, the PSMPC and members of the Financial Planning Association regarding redundancy related issues, it has been redrafted.

The following sets out supplementary paragraphs to be read in conjunction with the existing information on the duty of care (pages 17 and 21 of the Guidelines on Official Conduct).

Please ensure that this information is drawn to the attention of all staff, and particularly to those who provide advice to staff on entitlements and personal financial options.

If there are any queries concerning the matters contained in this circular, please contact the PSMPC on (02) 6202 3859.

Peter Kennedy
Deputy Commissioner

August 1996

Guidelines for public servants in relation to providing information on personal financial benefits and options

In the normal course of their work, human resource staff (i.e. Personnel) and the policy staff of relevant public sector agencies communicate with other public servants on matters relating to personal financial benefits and options. For example:

Personnel officers in all agencies provide factual information for staff on personal financial entitlements regarding recreation leave, long service leave, severance or redundancy payments and superannuation.
The staff of certain agencies (e.g. ComSuper, Australian Taxation Office) provide specialised policy information on superannuation benefits and options available to staff in general. Officers in these areas prepare, among other things, detailed information on alternative forms of benefits, relevant taxation regimes and conditions applying to various entitlements. Generally these staff provide information to Personnel areas of APS agencies.

Public servants in these fields should exercise due diligence and care in providing information to ensure the accuracy of the details provided to colleagues, particularly having regard to changing legislation on eligible termination payments and their tax treatment.

Information only, not advice, to be given

It is especially important that no advice by way of recommendations or suggestions, whether expressed or implied, direct or indirect, be given on the acceptance or otherwise of financial options or on how entitlements might be utilised e.g. investments, mortgage payout, real estate etc. Only persons with the appropriate licence from the Australian Securities Commission (or their authorised representatives) are permitted to provide advice on investments in securities (e.g.¾unit trusts, shares, bonds and superannuation products). Limited classes of persons can provide such advice without a licence, notably professional accountants and lawyers where the advice is incidental to their practice. When staff seek advice or recommendations on how to use their financial entitlements, they should be advised to contact a professional financial adviser. Public servants who offer such advice upon which others might be reasonably expected to act, or which could be applied to the individual circumstances of those being advised, could face common law action if damage resulted from action taken as a result of the advice. They also risk exposing the Commonwealth through vicarious liability.

Referring to professional financial advisers

Personnel staff in agencies should not be involved in promoting particular securities or financial service providers (such as fund managers, financial institutions, financial planning organisations or investment advisers). They may, however, provide appropriate guidelines (such as in material published by the Australian Securities Commission) and comprehensive lists of organisations or individuals qualified to offer securities advice for the purpose of assisting public servants in making a free choice in an informed manner.

Advisers who are selected from tenders to provide financial advice to staff, or other advisers selected under free choice by staff members, should be licensed and they will therefore be entitled to offer personal advice based on the financial position of each staff member.