Explain the best interests requirement

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Question - You have completed your formal qualifications in financial planning, and you have completed your provisional year of experience. You are at a birthday party for your best friend and during the evening you are approached by a former university friend, Amy for financial advice. Amy is with her husband, Colin. Your friends have saved $50,000 as a deposit for a home but they are not wanting to buy the home until next year. They know that you are a financial adviser, and they ask you if they should invest the money in a fixed term deposit or Australian shares. You have consumed a lot of wine during the evening, and you advise them to invest in Australian shares, in particular coal mining companies because you still see a great future with coal as an energy resource. Amy and Colin follow your advice and six months later they lose their investment.

The Financial Adviser Standards and Ethics Authority (FASEA) are concerned by your professional conduct when you advised Amy and Colin.

Explain the 'best interests requirement' and why you did not appear to comply with Section 961B(2) of the Corporations Act.

Reference no: EM133169595

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