Existing and new licensees subject to ‘fit and proper’ person tests

20 May 2020

Existing Australian financial services (AFS) licensees may be subject to ‘fit and proper’ person tests including periodic police and bankruptcy checks, according to The Fold Legal.

An analysis by the financial services law firm said the ‘fit and proper’ person test now applied to existing and new AFS licensees along with credit licensees.

Officers could also be asked to complete a declaration about any conduct of theirs that may affect their standing as a ‘fit and proper person’, it said.

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“If you apply for a variation to your licence the Australian Securities and Investments Commission (ASIC) will assess whether all existing and new ‘officers’ are ‘fit and proper’,” the analysis said.

“Consider putting measures in place to ensure you regularly check that ‘officers’ remain ‘fit and proper’.”

It said ASIC now had the ability to:

  • Assess the suitability of entities applying for a licence or that control an AFS or credit licence by requiring applicants to provide information on all officers of the licence applicant and any controllers of the licence applicant (or its officers);
  • Refuse to grant a licence if any of the officers of the licence applicant, or its controllers, if any, or the controller’s officers, are found not to be fit and proper;
  • Consider previous conduct in other businesses to determine whether an officer of a licence applicant will satisfy the fit and proper test; and
  • Vary or revoke an AFS or credit licence if the licensee, its officers, or controllers (or its officers) no longer satisfy the ‘fit and proper person’ test.

Officers of a firm, including directors, company secretaries, responsible managers, chief executives, chief financial officers, senior managers, or any other person who influenced a substantial part of business decisions could be asked to provide a criminal history check, bankruptcy check, and a statement of personal information.

The Fold Legal said this would allow ASIC to consider:

  • Any previous AFS or credit, or other professional licence, suspensions or cancellations of the person or any company for which they were a director;
  • Whether the person has had any banning orders;
  • Whether the person has ever been insolvent or has been the director of a company that has been placed into administration;
  • Whether the person has had any criminal offences; and
  • Any additional information that ASIC requests.



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Is the good old ASIC about to finish the cull?

Industry Super should have no problem - but anyone else in competition to Industry Super look out.

So what shall we do with almost all AFSL 'Executives' who do not have:
- a Business degree,
- actual advice experience,
- a decent FP qualification,
- TPB registration,
- ASIC FAR registration, or
- eligibility to sit the FASEA exam?
Woefully under qualified AFSL Management oversee Advisers as the regulations currently stand.

You have really missed the point haven't you. What ASIC is asking for is particular information about directors (executives) and controlling entities to ensure they are not crooks. Where does it say these executives (who are not responsible managers or financial planners) have to demonstrate education and experience?

Exactly.
Where does it say 'Execs' need to be properly qualified and experienced?
Merely not being a crook is hardly adequate. That's the point boof.

They don't have to be qualified. Is every director of every company in Australia qualified and experienced in the respect of the services provided by that company? How many AFSL dealer group directors have the same qualifications and experience as a Responsible Manager or Financial Adviser - boof.

I think you might find some opposition to your view that people who oversee and direct Advisers "don't have to be qualified".

Perhaps you all should actually read ASIC's information on this subject including who and why an entity, which is applying for an AFSL, has to provide this information. It is just not restricted to the directors of the AFSL entity but also the 'controlling entities'. This means an AFSL applicant may have a family company/trust that 'controls' the AFSL entity and that company/trust has the director's domestic partner as the sole (or joint) director. Are you saying that the domestic partner must hold the same education and qualifications as the RM or an adviser? Not according to ASIC.

While there is a general principle that execs and directors don't have to be qualified and experienced in the specific service their company provides, they do have to be accountable. They do have to ensure appropriate risk management is in place. They do have to employ people underneath them who know what's going on, and can advise them appropriately. Ultimately the buck stops with the execs, not their underlings.

Unfortunately when it comes to financial advice, regulators have ignored that principle of executive accountability. They have focused all their resources on persecuting front line advisers. The execs who set and enforce the ground rules and corporate culture for those advisers have been allowed off scot free.

The real problem with financial advice in Australia has not been the qualifications of execs. It has been the regulatory failure to make those execs accountable for their actions.

Now I think of it, perhaps ASIC should investigate ASIC staff and see if any staff are accepting gifts and if so, why? Silly me, a copy of their gift register was requested under FOI and rejected. Wonder why?

Fix and Property people should have nothing to hide. So ASIC, what are you hiding?

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