Australian Financial Services Licensing (AFSL) Forum

This topic contains 1 reply, has 2 voices, and was last updated by Grant Holley Grant Holley 4 years, 6 months ago.

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  • #4872 Reply

    KMack

    I would appreciate any guidance/ legislation references on the following scenario:

    Background:
    – The most experienced individual Auth Rep (#1) is starting to transition client servicing to other ARs (eg #2) within the business;
    – Existing clients currently know #1 as “their adviser” and know #2 as “staff/assistant to #1” as #2 have also been with the business for a long time;
    – New clients will be introduced to both #1 and #2 from inception of relationship/servicing;
    – Intention is for #1 is to stay involved in all client relationships at this stage and to give advice, along with #2.

    Question: Are there any issues/legislation which needs to be considered if we intend to:

    – Have both #1 and #2 physically sign off on advice and documents including SOAs?
    – Provide existing clients with an FSG for #2 (with their annual review documents, as they come due for review), to add to FSG for #1 and clarify the nature of the relationships of #1 and #2 within the review?
    – Provide prospective/new clients with an FSG for #1 and #2 from the outset.

    Many thanks for your time and consideration.

     

    #4874 Reply
    Grant Holley
    Grant Holley
    Member

     

    Hello,

    Thank you for your question.  We have responded to your three questions in turn below.

     

    1. Having ARs #1 and #2 physically sign off on advice and documents including Statements of Advice (SOAs)

    An SOA given by an AR must contain certain information pursuant to s 947C(2) of the Corporations Act 2001 (Cth) (‘The Act’).  This information includes, amongst other things:

    • a statement setting out the advice;
    • information about the basis on which the advice is or was given;
    • a statement setting out the name and contact details of the providing entity;
    • a statement setting out the name and contact details of the AR, or of each of the ARs, and stating that the providing entity is the AR of that licensee;
    • information about the remuneration to be received; and
    • information about any other interests or associations that might influence the providing entity in providing the advice.

    Further, s 947C(6) of the Act provides that the statements and information included in the Statement of Advice must be worded and presented in a clear, concise and effective manner.

    We would therefore advise that AR #1 and #2 may physically sign off on a single SOA, so long as the requirements in s 947C(2) of the Act are met for each AR.  For example, the contact details of both ARs will need to be included in the document, and if there are differences in the remuneration to be received by each AR then this must be clearly stated.

     

    2. Providing existing clients with an FSG for AR #2 to add to FSG for AR #1 

    Providing existing clients with an FSG for AR #2 appears to be the appropriate course of action.  Section 914B(1) of the Act requires an AR of a financial services licensee to give a person a FSG if the providing entity, as a representative of the authorising licensee, provides a financial service to the person as a retail client.  Therefore, if AR #2 is now providing financial advice alongside AR #1 to some or all of your existing clients, then a FSG for AR #2 must be provided to these clients.

     

    Additionally, it is important to note that under s 914B(2) of the Act, a Financial Services Guide must not be given to a client by the providing entity unless the authorising licensee has authorised its distribution by the providing entity.

     

    3. Providing prospective/new clients with an FSG for ARs #1 and #2 from the outset

    It follows from our response to question 2 that new or prospective clients should also be given an FSG for both AR #1 and #2, provided that this distribution is authorised by the licensee.

     

    Please feel free to contact our Financial Services Team if you require further information.

     

    Authors: Tamara Cherny (Legal Clerk) and Grant Holley (Partner)

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