Introduction
The Federal Court decision in ASIC v BPS Financial Pty Ltd [2024] FCA 457 highlight lessons for financial services providers about the risks of misleading and deceptive conduct. The case centred on the promotion of "Qoin," a cryptocurrency platform developed by BPS Financial. ASIC alleged that four key representations made by BPS in promoting Qoin were misleading or deceptive. The court found three of these claims to be misleading and deceptive, while the fourth was deemed permissible as an opinion.
The representations
ASIC challenged BPS on four grounds, arguing that the company made misleading representations about Qoin’s exchangeability (the Trade Representation), merchant network (Merchant Growth Representation, regulatory approval (the Approval/Registration Representation), and compliance with financial services laws (the Compliance Representation).
The Trade Representation claimed that users could exchange Qoin for fiat currency via independent exchanges. This representation was found to be misleading because no such exchanges existed at the time, and BPS lacked reasonable grounds to suggest they would emerge. The court emphasised that the absence of such liquidity directly affected Qoin’s perceived value and utility.
The Merchant Growth Representation involved BPS’s claims that Qoin’s merchant ecosystem was growing. In reality, the merchant network remained small, and many merchants were not actively using Qoin as a payment method. The court ruled this claim misleading, as it gave consumers a false impression of Qoin’s usability, which likely influenced their decisions to engage with the platform.
The Approval/Registration Representation, suggested that Qoin had received government approval or registration. The court found no such approval existed, and by implying regulatory backing, BPS misled consumers into believing Qoin was a secure and officially approved financial product.
However, the court did not find the Compliance Representation, which claimed that BPS was fully compliant with Australian financial services laws, to be misleading. This statement was deemed an expression of opinion, made in good faith, rather than a factual assertion. BPS genuinely believed that its status as an authorised representative of Australian Financial Services licensee sufficed for compliance, and the court accepted this as a reasonable, though subjective, belief.
Key takeaways for financial services providers
The ASIC v BPS Financial case highlights the fine line between optimistic claims and those made based on genuine belief. A central principle in misleading and deceptive conduct, as established in Global Sportsman Pty Ltd v Mirror Newspapers Pty Ltd (1984), is that a statement of opinion is not inherently misleading merely because it later proves incorrect. However, an opinion may mislead if made without reasonable grounds or if it creates a false impression when assessed objectively.
For financial services providers, this distinction is crucial. Optimistic projections or forward-looking statements need to be backed by credible evidence or reasonable grounds. Otherwise, they risk being treated as misleading claims. At the same time, providers must carefully frame expressions of belief or opinion to ensure they are not misconstrued as guarantees or factual assertions.
Ultimately, clarity, transparency, and an adherence to reasonable bases for claims are fundamental to avoiding misleading and deceptive conduct.
If you have any questions in relation to the above, please contact the authors Andrew Mutton or Sandra Bejo.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.