Australian Financial Services Licensing (AFSL) Forum

#3091 Reply
Our understanding is as follows: a trader (“the Trader”) creates a PAMM account (Percentage Allocation Management Module).  The PAMM account may provide information such as the Trader’s historical trading record.  People (“the Client”) can access that information and can then deposit funds into the trader’s PAMM account.  The Trader will trade the funds in the PAMM account.  The Trader will generally take a percentage of any profits made with Client funds.
The provider of a PAMM account is likely to require an AFSL with authorisations in relation to operating a managed investment scheme or a managed discretionary account service (MDA).  Without an AFSL with these (or similar) authorisations, the provider of the PAMM account (and possibly the traders) would not be able to induce people from Australia to use/invest in these accounts.  Any provider who provides this financial service/product in Australia without an AFSL is in breach of Australian financial services laws.  Offshore providers of financial services are required to hold an AFSL if the provider carries on a financial services business in Australia or intends to induce Australians to use its financial services.
Turning to your question, as a AFS licensee you are required to monitor and supervise the activities of your Authorised Representatives.  If your Authorised Representatives deal in an unlicensed financial product, by arranging for client to use an unlicensed PAMM account, it may expose your organisation to various types of liability.
Feel free to contact our team if you wish to discuss further.
Author: Chris Lim
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