Confusion over licensee reporting rules

There is some confusion lingering over when Australian financial service (AFS) licensees should inform the corporate regulator of changes in control to their entity, a law firm said.

In a blog, Holley Nethercote pointed to the conflicting information provided by the Australian Securities and Investments Commission (ASIC), which issued a directive earlier this year, that licensees should notify it of changes to controlling entity details for licensees other than body corporate licensees as defined by the Corporations Act 2001 no later than 10 business days.

However, it said licensees had 30 business days to inform it of changes to controlling entity details for licensees who were body corporate licensees as defined by the Corporations Act 2001.

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However, Holley Nethercote senior lawyer, Jesse Vermiglio, wrote that ASIC's interpretation could have arisen from the inconsistency in the two obligations as they related to body corporate licensees.

"Because the 30 business day requirement is found in the Corporations Act 2001, compared to the 10 business day rule which is found in the Corporations Regulation 2001, the general rule of interpretation is that the requirement in the Act trumps the requirement in regulation when an inconsistency exists," Vermiglio said.

"However, we do not think it is ideal to have to rely on rules of legal interpretation to understand when an AFSL holder is required to notify ASIC about changes in control."

Vermiglio warned that licensees should adhere to the rule of notifying of any changes within 10 business days as this original rule was not changed when the Government introduced the new obligation for body corporate licensees.

"We believe that it is prudent for all AFSL holders (including those who provide personal advice to retail clients on more complex products) to continue to comply with this requirement and notify ASIC within 10 business days of becoming aware of such a change," he said.




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