Many accountants have not been successful in obtaining an authorisation for a limited Australian financial services licence (AFSL) due to material deficiencies and not understanding the scope of the advice they provide, according to The Fold Legal.
The regulator approved 27 of the 62 applications for limited AFSLs lodged before July 2014.
The industry has now passed the one-year mark of the three-year transitional period.
From 1 July 2016, accountants will not be able to rely on the accountants’ exemption to provide advice to clients on the establishment or wind-up of an SMSF.
In order to provide this advice, they will need to operate either under a full or limited AFSL.
“Material deficiencies in both the documentation and the information provided by applicants were the main reasons given by ASIC for approving fewer than half of the limited AFSL applications lodged by accountants in the first half of the year,” The Fold senior lawyer Jaime Lumsden Kelly said.
“So it’s clear that rushing the process or applying before you are really ready increases the risk of a poor-quality application and, consequently, rejection by ASIC.”
Lumsden Kelly said accountants should be clear about the authorisations required for the services they provided and to make sure they had completed the required Regulatory Guide 146 training for the products they intended to provide advice on.
“It is also important to check the adequacy of their professional indemnity insurance and consult a specialist broker if they are uncertain,” she said.
Furthermore, she said the licence application process became much more streamlined if the financial information supplied to ASIC was correct and related to the entity applying for the licence.
“If accountants familiarise themselves with the ongoing AFSL obligations, things become simpler,” she said.
“The application will ask how the accountant proposes to comply with the obligations. To complete it, they need to know what the obligations are and how they propose to manage them.
“Ideally, their compliance procedures would be in place before they apply, but they certainly need to be ready by the time their AFSL is issued.”
The Fold has released an Australian financial services licensee manual, which provides guidance and procedures on these obligations.
According to the Investment Trends “April 2014 SMSF Accountant Report”, 25 per cent of accountants who had SMSF clients said they intended to obtain the limited AFSL by July 2016.
In addition, 11 per cent of SMSF accountants said they intended to obtain a full AFSL, while 20 per cent said they intended to refer clients to licensed specialists within the firm.
The research found 9 per cent of SMSF accountants intended to stop advising SMSF clients and the remaining 35 per cent said they either did not know what they would do yet or were already operating under a full AFSL.
The report was based on a survey of 1289 accountants who have SMSF clients.
