The Australian Securities and Investments Commission (ASIC) has started restricting the number of authorised representatives that Australian financial services licensees can appoint, which can have a “devastating” effect on businesses that want to appoint more than their licence allows, The Fold Legal warned accountants.
With the scrapping of the accountants exemption to advise on self-managed superannuation funds (SMSFs) and the 1 July limited licensing deadline fast approaching, the law firm has flagged various issues accountants need to be aware of, including the fact that in corporate groups, one entity can hold the AFSL and appoint other entities as authorised representatives.
Lawyer, Jonathan So, said only employees and directors of the AFS licensed company and its “related bodies corporate” can avoid the need to be appointed as authorised representatives once the licence is granted, so it is vital to select the licence holder with due consideration to avoid ongoing administration of authorised representatives appointments.
With restrictions on authorised representative numbers, “partnerships are particularly vulnerable because all partners and employees need to be appointed as authorised representatives”, So said.
Partnerships also might not be the ideal way to hold AFSLs as this could affect succession planning and the saleability of a firm, as AFSLs held in a partnership is attached to that partnership.
“Not only does this mean that the licence is lost if the partnership needs to be dissolved, an AFS licence can’t be sold with the other assets of the partnership,” So said.
“As AFS licences are not transferrable, if you’re likely to want to sell the goodwill that attaches to the licence, ensure it’s held by an entity which can be severed from any parts of the business you might want to retain.”
