The Association of Financial Advisers (AFA) has expressed concern at a recent court decision that more than $1 million held in a trust account of failed dealer group Australian Financial Services (AFS) will not be distributed to advisers still owed outstanding payments.
A court application was made by AFS administrators BDO regarding the nature of funds held in the AFS Group Brokerage Account.
Late last week the Federal Court of Australia decided that amounts received in the AFS Group Brokerage Account, including those generated as commission and fees from the advice and other activities of current and former authorised representatives of AFS, were not held on trust for those authorised representatives.
AFA chief executive Brad Fox said the development had generated considerable concern in the adviser community about the status of dealer group brokerage accounts.
He said he believed all advisers should make themselves aware of the status of funds held in accounts and where they might be directed in circumstances similar to those encountered by AFS.
"They need to ensure who owns the money when things go wrong," he said.
Fox said advisers should also consider the length of payment cycles from licensees and the time taken to process new business.