ASIC says forget commercial advantage, just get licensed

Efforts by an unlicensed company to gain licensing relief from the Australian Securities and Investments Commission (ASIC) to allow financial advisers to continue providing advice under a secondment arrangement gained short shrift from the regulator.

ASIC has revealed that the company, which was one of two entities of a corporate group, sought the relief to avoid financial advisers having to be authorised representatives of the licensee.

“We considered whether to grant licensing relief to two entities of a corporate group which sought the relief to allow the financial advisers of an AFS licensee to continue to provide advice following their transfer to an unlicensed entity, which was not a related body corporate of the licensee,” it said.

ASIC said that under a planned group restructure, the employment contracts of the financial advisers would have been transferred to the unlicensed entity, which would have then seconded the advisers back to the licensee.

However, the regulator noted that although the two entities were part of the same corporate group, trust arrangements meant the unlicensed entity was not a ‘related body corporate’ of the licensee. 

“The unlicensed entity, on behalf of both entities, sought relief that would treat the two entities as related bodies corporate and therefore allow the advisers of the unlicensed entity to provide advice on behalf of the licensee under s911B(1)(a) of the Corporations Act. The relief was sought to avoid the requirements in s911B which, in the applicants’ view, would have unusually onerous implications for them, including additional operational costs and business losses,” it said.

“We were not inclined to grant licensing relief because: (a) there were lawful and effective ways for the financial advisers to provide advice (including acting as authorised representatives of the licensee); and (b) we did not consider there was a net regulatory benefit, or that the regulatory detriment of granting the relief was minimal and clearly outweighed by the commercial benefit.”