Australian Financial Services Licensing (AFSL) Forum

This topic contains 1 reply, has 2 voices, and was last updated by  Chris Wallace 7 years, 10 months ago.

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  • #3197 Reply

    licencefx
    Member

    I’m interested to learn more about the possible risk to the licensee should an corp AR go broke. What happens if clients complain and want their money back as the AR can no long fulfill the obligations clients paid for.  Can the client complaint to FOS and make the licensee liable?

    #3227 Reply

    Hi licencefx,

     

    Licensees are responsible for the conduct of their authorised representatives according to ss 917A-C of the Corporations Act.  Therefore a licensee may be liable for client losses if one of their corporate ARs goes broke.  A licensee and its representatives need to meet base level financial requirements as a condition of its licence.

     

    By including appropriate provisions reflecting these conditions in their corporate AR agreement, licensees may be able to mitigate their exposure should one of their corporate ARs be at risk of going  broke.  It is also important that licensees either have professional indemnity insurance that covers their corporate ARs or require their corporate ARs to hold equivalent cover.

     

    RG 104 has more detail on the general obligations of licensees, and RG 166 provides information on financial resource requirements for licensees.  RG 126 has more information about insurance requirements.

     

    If you require further information, please don’t hesitate to contact our financial services team.

     

    Hope this helps!

    Author: Andrew Ham

    Co-contributor: Chris Wallace

     

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