Australian Financial Services Licensing (AFSL) Forum

This topic contains 3 replies, has 3 voices, and was last updated by Grant Holley Grant Holley 3 years, 11 months ago.

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  • #5105 Reply

    Osuper
    Member

    Hi

    Is this structure ok for a limited AFSL holder. XYZ Pty Ltd (AFSL holder)  wholly owned by Corpoarte Trustee Pty Ltd as truste for Unit trust.

    Am I correct that Corporate Trustee Pty Ltd as trustee for Unit Trust would be a related body corporate under Div 6 of XYZ Pty Ltd? Thus employees and directors of Corporate Trustee Pty Ltd as trustee for Unit Trust would not be required to be AR’s of the licensee XYZ Pty Ltd as per s911B, but anyone giving asdvice would have to be on the Financial Advisor register?

    Are there any issues with this, that you see?

    #5107 Reply

    David

    Good question. I can only see ASIC website talking about employees of the licencee, nothing about related companies etc. Why not make them an employee of the licence directly? Personally I think it comes down to who is the providing entity. If they are providing it on behalf of the licencee, I think they are financial advisors only. If they are providing it on behalf of the trust or themselves, or another CAR perhaps, they are external reps and advisors. I’m not a lawyer, but thats my 2 cents

    #5109 Reply

    Osuper
    Member

    Hi David

    Thanks for your reply. To give you a bit more explanation of the question and the reasoning for it. It would appear from my reading of Corps Act, Div 6 and s911B that in the structure outlined Corporate Trustee Pty Ltd ATF Unit Trust, if it is a related body corporate as per Div 6, which I think it is. Its not a mater of appointing them a CAR, they automatically by virtue of being a related body corporate are under XYZ Pty  Ltd’s license, and therefore need to act as if they were a license holder. There appears to be no way to exclude them from it.

    So not only would you be able to appoint directors and staff of Corporate Trustee Pty Ltd ATF Unit Trust to the advisers register and not the AR register, but you really need to educate all staff  of Corporate Trustee Pty Ltd ATF Unit Trust of their obligation as if they were staff of XYZ Pty Ltd, and not to give accidental inadvertent FS advice.

    I really need to work out to if my interpretation is correct, so any addition training that may be required of staff can be done if and when required.

    Thanks

    #5156 Reply
    Grant Holley
    Grant Holley
    Member

    Hi,

     

    Thank you for your question.

     

    Related Body Corporate

    Based on our understanding of the information given, if XYZ Pty Ltd (who holds an AFSL) is wholly owned by Corporate Trustee Pty Ltd, this would likely meet the definition of a subsidiary/holding company relationship under s 46 of the Corporations Act.  These two entities would therefore be related body corporates under the s 50 definition.

     

    This means that Corporate Trustee’s employees and directors will be ‘representatives’ of XYZ under s 910A by default, so they will not be required to hold their own AFSLs of be authorised representatives in order toe provide financial product advice.

     

    Financial Adviser Register

    You are correct that a representative who is a ‘relevant provider’ under s 910A (which includes an authorised individual providing personal advice to retail clients) will need to be recorded on the Financial Adviser Register.  This is done through notifying ASIC as required by s 922D.  ASIC then enters the details into the Register.

     

    Related Obligations

    In the scenario above, the ability of the Corporate Trustee’s staff (as representatives of XYZ) to give financial product advice will be limited to what XYZ’s licence covers.  For example, if XYZ’s licence is limited to financial product advice on superannuation products, their representatives can only provide advice on that matter.

     

    Internal processes may be put in place to ensure that advice is only given by individuals who are qualified to do so, and those that do give advice are aware of the limits of what they can advise on.  For example, training may be provided to ensure that all staff are aware of what constitutes ‘financial product advice’, and do not give advice inadvertently.

     

    We note that under s 912A of the Corporations Act, XYZ, as the licensee, will be under the obligation to ensure that representatives comply with the law (see sub-section (ca)), and are adequately trained and competent to provide financial product advice (see sub-section (f)).  Steps taken to meet these obligations may include maintaining a register of appointed representatives, verifying their education/qualifications and providing them with ongoing training.

     

    Please feel free to contact our financial services team if you require further assistance.

     

    Author: Grant Holley (Partner)

    Co-contributor: Nicolette Tan (Law Clerk)

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