AFSLs warned not to hire bankrupts
Australian financial services licensees (AFSLs) should think twice before employing someone with a conviction or bankruptcy as they can threaten compliance with a licensee’s obligations, according to The Fold Legal.
In a blog, head of licensing, Sonia Cruz wrote that employees with a history of bankruptcy or conviction could place the licensee at risk as they may not be of good fame and character, and they may be tempted to breach financial services laws or behave dishonestly.
The Australian Securities and Investments Commission (ASIC) can ban any person it believes to not be of ‘good fame and character’, and it can suspend an AFSL if a major representative of a licensee is banned, or if ASIC believes the licensee will not comply with general licence obligations.
Cruz also warned undischarged bankrupts could also create issues for licensees because they would have additional conflicts of interest.
“Even the best person can be motivated to behave dishonestly if they find themselves in difficult circumstances,” Cruz wrote.
“Undischarged bankrupts could be tempted to misappropriate client funds, so they shouldn’t be employed in any role that requires them to handle money or that gives them an opportunity or ability to misappropriate client monies.”
Furthermore, undischarged bankrupts cannot act as directors, responsible managers, company secretaries, or be involved in the management of a company. They can only undertake these roles once the bankruptcy is discharged.
However, they can be employed in other roles while still bankrupt.
AUTHOR
Malavika Santhebennur
Recommended for you
As the industry navigates the fallout from recent product failures, two major AFSLs have detailed their APL selection process and relationship with research houses, warning a selection error could “destroy” a licensee.
The impending retirement of financial advisers in their 50s could see the profession face significant succession challenges over the coming decade and younger advisers may not be the answer.
With a third of AFSLs being solo advisers, how can they navigate key person risk and ensure they are still attractive propositions for buyers when it comes to their succession planning?
A quarter of advisers who commenced on the FAR within the last two years have already switched licensees or practices, adding validity to practice owners’ professional year (PY) concerns.
