When can I use the word "independent"?

[Michelle Chasser]

The Australian Securities and Investment Commission has recently found 21 insurance brokers and financial planners falsely claimed to be ‘independent’.  The results were the outcome of a recent surveillance project in which ASIC found 21 instances of insurance brokers and financial planners making statements about the independence of the financial services provider or the services they provide in breach of the Corporations Act 2001.  In response to their findings ASIC Commissioner Peter Kell issued the statement “Going forward, where we find incorrect information about independence we will be taking stronger action including publicly naming the licensees involved.”

So what are restricted words?

Section 923A of the Corporations Act restricts the use of the words ‘independent’, ‘impartial’ or ‘Unbiased’, or any word or expression that conveys a similar meaning. Australian Financial Services Licensees must ensure that statements made by themselves of representatives in any published material comply with the relevant provisions of the Corporations Act.

When can you use restricted words?

To paraphrase the obligations, financial service providers can only use the restricted words if the AFS licensee (or any of its representatives or associates) does not receive any of the following:

• commissions that are not rebated to the client in full; or

• any form of remuneration based on the volume of business placed with a financial product issuer; or

• any gifts or other benefits from a financial product issuer which may  reasonably be expected to influence the provider of the financial service.

Also, you need to make sure that you operate free from restrictions and conflicts relating to the financial products you provide financial services in relation to.

What about credit service providers?

The National Consumer Credit Protection Amendment (Enhancements) Bill 2011 has been introduced to parliament and is scheduled to be debated in the Winter 2012 sittings.  If passed in its current form the Bill would introduce similar restrictions to those that apply to financial services providers.

Author: Michelle Chasser

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