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General conduct obligations

When intermediaries provide a water markets intermediary service they must:

• put the client’s interests first
• represent the client’s interests diligently and with due care and skill
• follow the client’s lawful instructions
• not use or disclose a client’s confidential information without the client’s authorisation. This includes confidential information for potential clients. An intermediary is permitted to give the information to an enforcement agency, or when required or authorised by law.

Dealing in good faith

An intermediary must always deal in good faith when providing services to current and proposed clients. If they don't, they may face civil penalties.

The meaning of good faith under the code is determined by reference to judge-made law. This is known as the ‘common law’. This concept can develop over time to reflect changing commercial practices and social attitudes.

The code sets our several factors a court may consider when deciding if an intermediary has acted in good faith. These factors include whether the intermediary has:

• acted honestly
• not acted arbitrarily, capriciously, unreasonably, recklessly or with ulterior motives
• conducted the relationship without duress

The court may also consider other details that are important to the situation.

Dealing with conflicts of interest

Intermediaries have certain obligations when managing conflicts of interest.

These include telling clients when there is a conflict of interest and, where there is a material personal interest, refraining from providing the relevant service in certain circumstances.

Disclosing a conflict of interest

Intermediaries must tell their current or proposed clients about any conflict of interest.

A conflicting interest may include the intermediary or its related party receiving, or expecting to receive, a benefit from a person who is not the client or proposed client. This could be a commission, fee or any other type of benefit.

For example, a conflict would arise where an intermediary acts for both a buyer and a seller to the same trade and receives a fee from each party to facilitate the transaction.

There are other situations and circumstances that may be a conflict of interest.

Disclosing conflict of interest needs to:

• be in writing
• specify the interest and the circumstances that give rise to the conflict
• be made before the service is provided, if the conflicting interest exists before the intermediary begins providing the service, or as soon as practicable after the intermediary becomes aware of the conflict, and
• include a request for the current or proposed client to confirm in writing that they have received the disclosure. The service can still be provided even if there is no written confirmation from the current or proposed client. 

There is an exception to the disclosure requirement in relation to a related party. This exception is if the intermediary does not, or cannot be reasonably expected to, know that the related party has, or will have, a conflicting interest in the provision of the service.

Providing services where there is a material personal interest in the water right

Intermediaries, or their related parties, that have or will have a material personal interest in a water right have additional obligations under the code when providing services to current or proposed clients.

Intermediaries that have or will have a material personal interest in a water right:

• must not provide the service for that water right. There is an exception where an intermediary only provides the service for a related party.
• must notify the current or proposed client in writing that the code prohibits them from providing the service.

Disclosure of material personal interest

Disclosure of the material personal interest needs to be made as soon as practicable, either:

• after an intermediary has been engaged or instructed by a proposed client to provide a service, or
• after the intermediary first becomes aware of it. In this case, it may be after the intermediary has begun to provide the service.

An intermediary has not contravened their obligations if they do not know, or cannot be reasonably expected to know, that the related party has a material personal interest in the tradeable water right.

Material personal interest obligations in relation to live-matching services

Where intermediaries provide or offer live-matching services for water rights they must not improperly use their status, power or authority to gain an advantage. This includes ensuring the same for related parties.

This obligation will apply where:

• the intermediary provides or proposes to provide a service involving the live-matched trade or transfer of a water right
• the current or proposed client is a related party of the intermediary and has, or will have, a material personal interest in that water right
• the intermediary does not, or will not, have a material personal interest in that water right.

This does not apply if an intermediary does not know, and cannot be reasonably expected to know, that the related party is improperly using its status, power or authority to gain, an advantage for itself or for the intermediary in providing the service.

Material personal interest obligations for irrigation infrastructure operators

An intermediary that is an irrigation infrastructure operator that has or will have a material personal interest in the water right service they are providing, is not prohibited from providing that service. However, they must not improperly use their status, power or authority to gain an advantage through the provision of that service. This obligation also covers related parties.

This does not apply if the irrigation infrastructure operator does not know, and cannot be reasonably expected to know, that the related party is improperly using its status, power or authority to gain, or to seek to gain, an advantage for itself or for the irrigation infrastructure operator in providing the service.

Providing information about services to clients

Intermediaries must disclose certain written information about their services and obligations to clients. This includes:

• general information about services the intermediary provides and certain legal obligations
• service-specific information giving extra details about the services that will be provided.

General information that must be given before providing a service

Intermediaries must give general information in writing within a reasonable period before providing any service to a client.

The information must include:

• the services they provide and how much they generally charge in the commission or fees for providing those services
• their legal obligations to clients under the Australian Consumer Law, part 5 of the Water Act, and the code. This includes copies or references to the provisions that impose these obligations
• details of particular types of enforcement actions taken against them in the past 3 years under certain provisions of the code or Water Act. This includes what the enforcement action was and the outcome if there was one.
• a copy of the complaints‑handling process the intermediary is required to have.

The information of certain intermediaries must also include:

• the method used to allocate or divide water allocations between clients in intervalley trades, for example in chronological order or on a pro rata basis. This only applies to intermediaries that offer this service
• how water rights held in a broking account will be dealt with if they cannot be transferred to their lawful owner, such as cases where there’s a small residual volume. This only applies to intermediaries who hold client water rights in broking accounts.

Service-specific information that must be disclosed

Intermediaries must give some additional information in writing before providing a service to the client in exchange for a commission or fee.

The information must include:

• the kind of service to be provided and the service terms and conditions
• the commission and fees they will charge for these services if they are different to what the intermediary generally charges
• if and why the client’s water rights are to be kept in a broking account, that is maintained by the intermediary. This does not need to be given if the service is to investigate water rights trading possibilities
• the following details, if the service is to investigate trading possibilities for water rights. This does not apply to information that was given to the intermediary in writing by the client:
  • what water rights are possibly being traded and whether the client is buying or selling
  • the volume of water rights (in megalitres) to be traded, whether that volume may be split, and the price per megalitre or a price range of each volume.
  • when or how the client’s instructions will expire or are withdrawn.
  • any other conditions that apply to the service, such as if the service is exclusive or not.

Intermediaries must also notify a client of the outcome of any application submitted to a water market authority to approve, allow or register the trade or transfer of a water right. The intermediary must do this within 2 business days of becoming aware of it. The intermediary must also include the water market authority’s reasons for a rejection or delay.

Dealing with complaints

Intermediaries must have a documented process for dealing with complaints that meets the requirements of the code.

When intermediaries receive a complaint from a client or proposed client about a water markets intermediary service they must deal with it in good faith.

The complaint process starts when the intermediary receives a complaint. Intermediaries must make a genuine attempt to resolve it within 20 business days.

During the complaint process they must give the following information to the client or proposed client:

• within 2 business days of receiving the complaint:
  • written confirmation that the complaint has been received
  • a copy of the written record of the complaint made by the intermediary if the complaint was not received in writing
  • information about process that will be followed by the intermediary when dealing with the complaint.
• within 10 business days of receiving the complaint, a written response that specifies the intermediary’s proposed actions to resolve the complaint.

The complaint process ends when the intermediary has completed the complaint process and notified the client or proposed client of the outcome. This must be given in writing within 5 business days of completing the complaint process.

Authorities for water markets intermediaries

The code includes requirements for intermediaries to hold appropriate authorities when providing water markets intermediary services.

Authority to trade or transfer a water right

When an intermediary applies to a water markets authority as part of providing intermediary services, they must hold a written authority to make the application. This does not apply to irrigation infrastructure operators.

The written authority must be from each person who holds an interest in the water right proposed to be traded or transferred. When there are multiple people with an interest, written authority must be obtained from each person.

The written authority must include the below information:

• the name of each person holding an interest in the water right
• the name of the intermediary authorised by each person who holds an interest in the water right to make the application
• the licence or account number of the relevant water account
• how long the authority is valid for, which cannot be longer than 3 years
• the number of trades or transfers the authority is valid for (if relevant)
• if any person who holds an interest in the water right is a corporation, an Australian Securities and Investment Commission or Office of the Registrar of Indigenous Corporations extract for that corporation (the extract must be less than 12 months old)
• set out how the authority can be rescinded. 

The written authority must be signed. There are 2 options for who can sign the authority.

1. The written authority can be signed by all people who have an interest in the water right
2. Another person can sign the written authority if:
   • they have been authorised to sign by all people who have an interest in the water right; and  
   • the authority is in a document registered with a water market authority  
   • the person authorised to sign is not a water markets intermediary.

If using option 2, the signed written authority must be accompanied by the document registered with the water market authority that provides the relevant authorisation. For record keeping, depending on individual circumstances, this could be a screenshot or scanned copy of the document registered that must be kept by the intermediary. 

The requirement for holding written authorities under regulation 5.10 apply in addition to any rules set by water market authorities.

Authority to act as an agent

An intermediary must not act as an agent for the client unless it has obtained written authority from the client with the following:

• the name of the intermediary who is to act for the client
• how long the authority is valid for
• an Australian Securities and Investments Commission or Office of the Registrar of Indigenous Corporations extract that is less than 12 months old if the client is a corporation
• the terms of the agency arrangement, including the overall trading objective and the water rights to be made available to achieve that objective
• explicit authority for the agent to apply to water market authorities to approve, allow or register the trade or transfer of the eligible tradeable water rights, if relevant
• how the client can rescind the authority
• the signature of the client.

Professional indemnity insurance

Intermediaries must hold professional indemnity insurance to cover the services they provide and the specified insurance requirements in the code.

The insurance policy must provide at least:

• $5 million for any one claim, and
• $10 million in total for the year.

Alternatively, the policy can provide:

• at least $5 million for one claim and in total for the year, and
• include an automatic right to reinstate the total coverage

Insurance requirements for irrigation infrastructure operators

Some irrigation infrastructure operators may be able to hold cover with a lower insured amount than other intermediaries. Regulation 5.14(3)-(5) sets out details about when this applies. It also sets out the details used to determine what amount of insurance is adequate and appropriate.

Meeting broking account requirements

Intermediaries must also meet the broking account requirements if they receive and hold eligible tradeable water rights on behalf of a client.

Meeting trust account requirements

Intermediaries must also meet the trust accounting requirements if they receive money on behalf of another person when providing intermediary services.

Record keeping

Intermediaries must comply with requirements in the code to keep information and records. These are set out in detail in regulations 5.15, 5.16 and 5.17.

Record keeping requirements for trust accounts

From 1 July, intermediaries must keep the following trust account records for 6 years:

• records of notifying the ÌÇÐÄÔ­´´ of a trust account
• records of receipts, deposits, payments and invoices for any money paid into or withdrawn from the trust account, and
• bank statements for the trust account.

Other record keeping requirements

From 1 October, intermediaries must keep particular records for 6 years from when they receive or prepare the record. Examples of documents to keep include, but are not limited to:

• broking account statements
• trust account statements and auditor reports
• certificates currency and insurance policies for professional indemnity insurance
• ledger statements given to clients for broking accounts and trust accounts
• records created when dealing with complaints
• records created when dealing with conflicts of interest and material personal interest
• records of authorities to trade and act
• records of notifying the ÌÇÐÄÔ­´´ of a broking account
• records of instructions received from the client
• records of applications submitted to water market authorities
• records of buy or sell offers and matched trades
• information provided to clients.

Sharing information between intermediaries

Under the code, an intermediary is not required to provide information to another intermediary. Generally speaking, where the code requires an intermediary to provide information to another person, it is generally to a client or prospective client.

There may be times when an intermediary considers it necessary to share information with another intermediary to provide a service to a client. If an intermediary intends to share information with another intermediary, be aware of any obligations that may apply under the Code and/or other laws, such as the Competition and Consumer Act 2010.

Fair trading obligations

Water market intermediaries, like other businesses in Australia, are subject to the Australian Consumer Law. The consumer law protects consumers from unfair business practices.

See also

Water markets intermediaries and services covered by the code

Statutory trust accounting requirements for eligible water markets intermediaries