Authorised representatives of licensees could be personally liable for Best Interests Duty breaches post-FOFA and should seek other contractual arrangements, a financial services lawyer has warned.
Charmian Holmes, solicitor director at The Fold Legal, says being an authorised representative in the new regulatory environment poses additional risks, and that advisers should ask their licensee to let them provide advice as an employee only.
After the FOFA (Future of Financial Advice) reforms implementation date of July 1, authorised representatives (ARs) may face fines of up to $200,000 for serious breaches of the Best Interests Duty, while salaried advisers will enjoy the protection of their licensee.
“There is actually no legal requirement for employed advisers to be appointed as ARs,” Ms Holmes said. “They can provide financial services under their employer’s AFS licence without it; if an employed adviser is not an AR, these fines won’t apply to them.”
The lawyer warned that under an AR arrangement, the individual adviser will have to deal with the Australian Securities and Investments Commission themselves in the event of allegations of non-compliance, and could potentially even face the prospect of bankruptcy in some cases.
“Professional indemnity insurance doesn’t cover these fines so, my advice to them is to ask their licensee to terminate their appointment as an authorised representative right now,” she said.
For an extended version of these comments see the upcoming ifa magazine.
SUBSCRIBE TO THE IFA DAILY BULLETIN
- 20 Jul 2018CPA shutters financial advice divisionBy Reporter
- 20 Jul 2018Don't neglect AI, advisers warnedBy Tim Stewart
- 19 Jul 2018AMP unveils new in-house training programBy Reporter
- 19 Jul 2018Self-licensed adviser cops 4-year ASIC banBy Reporter
- 19 Jul 2018Hub24 to launch new core offeringBy Reporter
- 19 Jul 2018SMSF sector warns about advice ‘exodus’By Miranda Brownlee
- view all