A review from the corporate regulator has resulted in the cancellation of 58 AFSLs that breached the law because they were also authorised representatives of other AFSLs.
ASIC said it 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.
A licensee cannot be the authorised representative of another licensee unless they are a general insurance underwriting agent or broker operating under a binder given by an insurer under section 916D of the Corporations Act 2001.
ASIC said in circumstances where an authorisation has been granted to one AFS licensee by another, it 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,” ASIC said.
“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 said it expects licensees to check its 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 AFSL.
It also advised licensees to adopt this practice as part of their onboarding process, and that 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.
Adrian Flores is a deputy editor at Momentum Media, focusing mainly on banking, wealth management and financial services. He has also written for Public Accountant, Accountants Daily and The CEO Magazine.
You can contact him on [email protected].
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