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Small practices more susceptible to ASIC scrutiny

Accountants operating a small practice who are assessing their licensing options that will enable them to continue servicing their existing SMSF clients should be aware they are more prone to be significantly affected by regulator examination, according to a specialist lawyer.

Speaking at a Perpetual Private SMSF licensing workshop last week, The Fold solicitor director Jaime Lumsden Kelly said: “Small businesses appear to be punished more harshly by ASIC (Australian Securities and Investments Commission). It’s not so much ASIC punishes them more harshly as that they don’t have the resources when they come under ASIC scrutiny that larger business have [to defend themselves].

“While larger businesses like banks might be able to enter into long-term monitoring and supervision campaigns with ASIC, small businesses usually just have to shut down.

“So when ASIC comes knocking and wants to ask some questions and has some concerns, small businesses just don’t have the resources to rectify the problems and repay money to the clients and the like.”

Lumsden Kelly emphasised the ability to deal with ASIC scrutiny and any liability issues arising from instances of questionable advice were not affected by a practitioner’s decision as to whether to operate as a licensee or an authorised representative of another licence holder.

“There is a notion that if you have your own licence, and you are the responsible manager on that licence, then you have an increased level of liability. That’s not actually the case,” she explained.

“The liability attaches to the person giving the advice. It may sometimes attach to the responsible manager if they are the person supervising the giving of the advice.

“But again it’s an advice function that is driving the liability.”

Lumsden Kelly said that liability pertained to elements such as whether the advice was correct or whether it had been properly peer reviewed and supervised.

“So in that sense whether you get your own licence or become an authorised representative, your liability and exposure for giving the advice is going to be roughly the same,” she said.

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