The Australian Securities and Investments Commission (ASIC) has revoked the authorisations of 58 Australian finance services (AFS) licensees who were also authorised representatives of another AFS licensee.
The regulator took the action after conducting an investigation of 65 cases where an AFS licensee was also appointed as an authorised representative of another licensee and found that 58 licensees were in breach of the law.
Section 916D of the Corporations Act 2001 prohibits licensees being an authorised representative of another licence holder unless they are a general insurance underwriting agent or broker operating under a binder given by an insurer.
ASIC stated where an authorisation had been granted to one AFS licensee by another, it was concerned the licensees may not have appropriate compliance measures in place creating potential risks to consumers.
The regulator pointed out a licensee may not retain its professional indemnity (PI) insurance or membership of an external dispute resolution (EDR) scheme if they were operating as an authorised representative of another licensee.
ASIC added since such an authorisation is void under the law the licensee providing advice as an authorised representative would not have access to the other AFS licence holder’s PI insurance or EDR scheme, creating unacceptable risks to clients.
The corporate watch dog stated it was the responsibility of AFS licensees to check the regulator’s professional registers before authorising any new representatives to prevent providing authorisation to people or entities that already held an AFS licence, and should adopt this practice as part of their onboarding process.
