Why terminating an AR may be good business
Termination for a poor regulatory compliance history may be a reality for those undertaking the acquisition of a financial advice firm, according to specialist legal firm the The Fold.
One of the firm’s director, Simon Carrodus has used a blog to point out that retaining authorised representatives is not straightforward and that their individual compliance history should be reviewed.
“You may need to terminate a representative if they have a poor compliance history or require the seller to do so as a condition precedent,” he wrote.
Carrodus said that exposure to non-compliance could be fatal for purchasers but many buyers simply did not include a compliance audit in their due diligence.
He said the Australian Securities and Investments Commission (ASIC) “is on the warpath and you can be liable even if you weren’t operating the business at the time of non-compliance”.
“So before you purchase a business that holds an Australian Financial Services Licence or Australian Credit Licence you need to make sure the compliance records and policies are up to standard,” Carrodus said.
“If you purchase a business with a history of non-compliance, ASIC may hold you accountable for regulatory non-compliance. This is possible even if the acts or omissions that led to non-compliance took place under the previous owner.”
Recommended for you
As the first quarter of 2024 comes to a close, Money Management looks back on the corporate regulator’s bans and AFSL cancellations in the financial advice sector.
Insignia Financial is holding ‘relatively steady’ onto its rank as Australia’s second-largest financial advice licensee after the Godfrey Pembroke exit but Count is hot on its heels.
Liberal senator Slade Brockman has said the government needs to have a “cold hard look” at the level of regulation in the financial advice space and the costs of running a business.
FAAA chief executive, Sarah Abood, has warned changes in the first tranche of the QAR legislation around advice fees documentation could create more work for advisers rather than less.