ASIC review results in incorrect dual authorisation of 58 AFS licence holders rectified
The move follows an ASIC investigation of 65 cases where AFS licence holders had also been appointed as authorised representatives by another AFS licensee.
The Australian Securities & Investments Commission (ASIC) has earlier today announced that 58 holders of Australian finance services (AFS) licenses, that were in breach of the law because they were also authorised representatives of other AFS licensees, have now had their authorisation.
The move follows an ASIC review. ASIC investigated 65 cases where AFS licence holders had also been appointed as authorised representatives by another AFS licensee. Of the 65 cases investigated, ASIC found that 58 were in breach of the law.
Under section 916D of the Corporations Act 2001 (the Act), 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.
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.
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 notes that AFS licensees to check ASIC’s professional registers prior to granting a authorisation to new representatives to ensure that they do not authorise a person or entity that already holds an AFS licence. AFS licensees are encouraged 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.