ASIC cracks down on dual ARs

Financial planning licensees have been placed on notice to do better background checks of their authorised representatives (AR) to ensure they are not already authorised either under their own license or that of another licensee.

Self-licensed planners had been put on notice that to become an AR they may have to give up their license.

The Australian Securities and Investments Commission (ASIC) said that 58 Australian financial services (AFS) licensees, had been found to be in breach of the law because they were also authorised representatives of other AFS licensees.

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It said the licensees had now had their authorisation revoked in circumstances where, under section 916D of the Corporations Act 2001, an AFS licensee cannot be the authorised representative of another AFS licensee, unless they are a general insurance underwriting agent or broker operating under a binder given by an insurer.

The regulator said that it had investigated 65 cases where AFS licence holders had also been appointed as authorised representatives by another AFS licensee and that those 65 cases ASIC found that 58 were in breach of the law.

“In circumstances where an authorisation has been granted to one AFS licensee by another, ASIC is concerned that licensees may not have appropriate compliance measures in place, resulting in potential risks to consumers,” ASIC said in a statement.

“For example, an AFS licensee may not maintain Professional Indemnity Insurance (PII) or membership of an External Dispute Resolution (EDR) scheme because they are operating as an authorised representative of another licensee. However, because their authorisation is void under the law, the licensee providing advice as an authorised representative will not have access to their AFS licensee’s PII and EDR scheme. This poses an unacceptable risk to their clients.”

“ASIC expects AFS licensees to check ASIC’s professional registers prior to granting an authorisation to new representatives to ensure that they do not authorise a person or entity that already holds an AFS licence,” the ASIC statement said.

“AFS licensees are advised to adopt this practice as part of their onboarding process. AFS licensees wanting to become authorised representatives must give up their licence or take necessary steps to ensure that they are not in breach of the law.”

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Surely a simple fix is that ASIC's systems restrict the dual authorisation from occurring with a simple red flag upon administration.

What about Corporate Authorised Representatives, and their advisers, that have applied for, and been granted an AFSL but will not be released by the existing licensee for say, 30 days (contractual obligations). It would not be sensible for a CAR to give notice to the existing licensee until it is notified by ASIC that its AFSL has been granted. This means the new licensee will be a licensee and it and its CAR / Advisers will also be Authorised Representatives of the existing licensee until the existing contractual obligations with that licensee are fulfilled.

Billy this happened to me when I self licensed about 3 or so years ago. A condition on our AFSL being granted was that we ceased being authorised with our existing dealer group, we wrote to ASIC and they granted a window of 30 days to be dual authorised, during which we issued the transfer letters and allowed us to service our clients. They are very understanding if you communicate with them.

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