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.
Comments
Quietly astonished that being undischarged bankrupt cast in such a negative light. In reality many people who become bankrupt do so not due to doing anything dishonest or indicative of poor ethics. They simply fall into unpayable debt for a variety of reasons - e.g. going guarantor for a relative. A past Chief Justice of the High Court became bankrupt during the Depression. I hope the author is not suggesting they should not have been permitted to practice their craft for that reason...
“Even the best person can be motivated to behave dishonestly if they find themselves in difficult circumstances,” Cruz wrote.
That generally happens beforehand to avoid bankruptcy.
I'm with you Brett. People also go bankrupt after being victims of fraud, messy divorce or even subject to medical events and have inadequate or unable to get insurance.
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