[Megan Jaksa]

Hi Matt,

Thanks for your question.

Whether your business will need an AFSL is not always a simple question. ASIC provides some guidance on their website.  The question is not whether you are offering services to Australian clients but whether you are operating a financial services business in Australia, which is a broader test.

Generally, offering a PAMM service to people in Australia (or, if the company is based in Australia, to people overseas) would require an AFSL, which includes a managed discretionary account authorisation (see RG179).

Often it is the company that holds the licence.  The employees are therefore not required to hold an AFSL, but are still required to meet certain training and supervision requirements.

If you do need an AFSL, there are several ways that it can be structured.  To answer both questions completely for your business, you will have to obtain expert legal advice.  Please contact our financial services team if you wish to discuss further.

Author: Paul Derham

Co-contributor: Megan Jaksa

[Megan Jaksa]

There are not any formalised resources that will help you identify a RM for your ACL that we are aware of. We would suggest utilising your professional networks to identify suitable people that would be willing to work with you, either as a consultant or as an employee.

If your network is unable to help, you could consider utilising a recruitment company to aid in your search, or see if you can access any resources through professional bodies of which you may be a member.

Please feel free to contact us should you require any further information.

Author: Tim Nethercote
Co-contributor: Megan Jaksa 

[Megan Jaksa]

Hi Andrew,

Thanks for your question.

The test for whether you provide financial product advice is not whether you receive commissions – many people and organisations who provide financial product advice receive no commissions of any kind. Under the law, if you make a recommendation or statement of opinion that is intended to influence a person (or a group of people) in making a decision in relation to a particular financial product (or a particular class of financial products) then you are providing financial product advice. ASIC’s Regulatory Guide 36 includes a good discussion of what conduct constitutes financial product advice.

However, as with most areas of law, the answer is not that simple. There are a range of exemptions that may apply to your proposed blog, depending on how you are structured and what you propose to discuss. Also, some discussions may not meet the definition of financial product advice, so licensing may not be an issue.

There are laws in Australia prohibiting the receipt of a secret commission, as well as prohibiting misleading or deceptive conduct or statements, so you should disclose your payment arrangements clearly.

More information is required to give you a definitive answer, so we would recommend you seek legal advice before proceeding.  Please contact our office and speak to someone in our financial services team.

Author: Paul Derham

Co-contributor: Megan Jaksa

[Megan Jaksa]

Thanks for your question.

According to the Exposure Draft of the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, which was released on 29 January 2014, these types of clients will no longer be captured.

Under the current legislation, clients fall under either Subdivision B or C of Division 3 of Part 7.7A.  Subdivision B applies to clients who have not been provided with personal advice as a retail client before 1 July 2013.  Subdivision C applies to any clients that are not captured by Subdivision B.  Broadly speaking, Subdivision B captures all of your new post-1 July 2013 clients and Subdivision C captures all of your pre-1 July 2013 clients.

The draft legislation repeals Subdivision C in its entirety.  As a result, any clients to whom you have provided personal advice as a retail client prior to 1 July 2013, will no longer require a FDS.

Please note that this answer is based on the Exposure Draft and may change if any amendments are made to the legislation.  It also assumes that there has been no change to the licensee providing the advice to the client since 1 July 2013.

For further information, please feel free to contact our office.

Author: David Court

Co-contributor Megan Jaksa

[Megan Jaksa]

Hi Gav,

We are not aware of the specific pricing that licensees offer.  You will need to make your own enquiries in this regard.

However, we do note that becoming an AR of an existing AFS licensee is an important decision that should take into account a range of factors other than cost.  You will need to identify a licensee that holds the authorisations that cover the type of business you seek to run and is a good cultural fit with your business.  The licensee will have a high level of oversight over your operations, so you need to ensure that your expectations match and that you can communicate effectively.

You will also need to consider the licensee’s prior conduct. ASIC has expressed concerns with some licensees who appoint ARs but do not conduct adequate supervision of the ARs’ businesses.  Ensuring that you are aligning your business with a licensee possessing a strong compliance culture will help you stay within the law and avoid unwanted attention from the regulators.

 

Feel free to contact our office for further information.

 

Author: David Court
Co-contributor: Megan Jaksa

[Megan Jaksa]

Hi,

An SMSF is certainly a financial product that falls within the anti-hawking provisions of the Corporations Act.  These provisions do not entirely prohibit cold-calling in relation to financial products. For example, provided the call was made between 8am to 9pm Monday to Saturday to a number that is not listed on the Do Not Call Register, and if the customer is given a PDS prior to being bound to acquire the product, then the call will likely fall within the law.

If you still have concerns about the call you received we suggest informing ASIC or ACMA (if you are on the Do Not Call Register).

Author: David Court
Co-contributor: Megan Jaksa

[Megan Jaksa]

Hi KMack,

We posted a response to your second post under the topic ‘Fee Disclosure Statements’ on May 20 (post 3267).  It should be showing on the forum and you should be able to continue to comment.  Let us know if you still cannot see the response and we will have our IT people look into it.

In relation to your latest query, RG245.61 and 245.62 address slightly different issues.  RG245.61 states that where it is impossible or unreasonably difficult to identify the date that an ongoing fee arrangement was entered into, ASIC expects fee recipients to enter into a common sense approach.  You are correct that the example is just one of many common sense approaches that could be taken.  However, the use of an alternative “common sense approach” runs the risk of ASIC taking enforcement action if it did not agree with that approach.

RG245.62 states that ASIC will not take enforcement action against a fee recipient if they follow the process in RG245.62(a)-(c).  In the scenario you describe, we would suggest following this process to take advantage of ASIC’s no-action position.  However, if you nominate dates after 31 January 2014 that you are treating as the anniversary, then you will not be covered by ASIC’s no-action position and you may be at risk of enforcement action.

We note that once you have issued the initial FDS, you could then consider ‘resetting’ the disclosure day by issuing a resetting FDS as outlined in RG245.71 if you wish to reset your disclosure dates to the second half of 2014.

Please contact our office if you wish to discuss further.

Author: David Court

Co-contributor: Megan Jaksa

[Megan Jaksa]

Whether the rebate will fall within the conflicted remuneration provisions will depend on how this rebate is paid and structured.

Conflicted remuneration is defined as any benefit given to an AFSL holder or representative that could reasonably be expected to influence the choice of financial product recommended by the licensee to retail clients, or could reasonably be expected to influence the financial product advice given by the licensee to retail clients. While volume-based benefits are presumed to be conflicted remuneration under s963L, benefits that are not volume-based may also be conflicted remuneration and therefore banned.

If the rebate is paid to you in response to your recommendation of certain products, the rebate could reasonably expected to influence the products you recommend to your retail clients. If so, it may be regarded as being conflicted remuneration. This is true even if you just provide general advice.

The Corporations Act also prohibits product issuers or sellers from giving an AFSL holder or representative conflicted remuneration.

It is difficult to determine whether a rebate will be conflicted remuneration without knowing specific details about the proposed benefit. You may wish to seek legal advice to ensure you are compliant with the financial services laws prior to 1 July 2013.

If you require further information, please contact our office to discuss.
Author: David Court

Co-contributor: Megan Jaksa

[Megan Jaksa]

Hi James,

Advisers must disclose to retail clients remuneration or other benefits that might reasonably be expected to be capable of influencing themselves, their corporate authorised representative (if applicable), the licensee, and other parties. However, you’re correct in saying that there is no specific requirement to include the recommended product fees in the SoA.

As you know, PDSs and FSGs often include examples to illustrate the impact of various fees. Although some disclosure can be ‘incorporated by reference’, statements of advice must still be clear, concise and effective.

ASIC’s interpretation of the new ‘best interests’ provisions requires advisers to help clients to be in a ‘better off’ position. We think a consideration of product fees is a significant component of this process and should be clearly explained.

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

Kind regards,

Author: Paul Derham

Co-contributor: Megan Jaksa

[Megan Jaksa]

Hi,

 

Whether you need an AFSL depends on whether you are in the business of providing financial services in Australia within the definition in the Corporations Act. If so, you will then need to consider whether the signalling service falls within the definition of a financial service, such as “financial product advice”. If the answer to both these questions is ‘yes’, then you will most likely need an AFSL whether you provide signalling services to the investments firm or to the public.

 

We are unable to provide a more definite answer without knowing a lot more about your circumstances. Contact our office if you want to seek legal advice.

 

Author: Paul Derham
Co-contributor: Megan Jaksa 

 

[Megan Jaksa]

Hi Rus,

 

There is no requirement under the transitional provisions requiring the completion of Certificate IV in Credit Management. The transitional arrangements mainly relate to responsible managers and representatives. You can find all the information in ASIC’s Regulatory Guide 206.

 

Feel free to contact us if you require further information.

 

Author: Kathryn Wardrobe
Co-contributor: Megan Jaksa 

 

[Megan Jaksa]

Hi Nevermore,
There is no quick or easy answer to your question. Depending on how you plan to structure your business, you will need to consider :
•an appropriate AFS Licence;
•AML/CTF compliance;
•compliance processes and procedures;
•appropriate disclosure documents; and
•business structure (shareholder agreements, constitution, trust deed etc).

We would recommend you seek legal advice to obtain more specific guidance.  Feel free to speak with one of our lawyers for further information.

Author: Paul Derham
Co-contributor: Megan Jaksa

[Megan Jaksa]

Hi Jeremy,

Thanks for your question. As you are aware, under the National Consumer Credit Protection Act 2009, anyone who engages in a credit activity must be licensed. There is no exemption for a company that is newly formed, nor for a company that has a low turnover. However, the requirement to hold an ACL may not apply if the credit you provide is limited to:

•    a total period that does not exceed 62 days; and

•    the maximum amount of fees and charges does not exceed 5% of the amount of credit; and

•    the maximum amount of interest that may be imposed does not exceed what would be payable if the annual percentage rate was 24% per annum.

If your proposed business meets these restrictions then you may not need an ACL.

However, the Consumer Credit Legislation Amendment (Enhancements) Act 2012 introduces new, stringent requirements around ‘short-term’ and ‘small amount’ credit contracts. The new regulations may impose a requirement to hold an AFSL as well as strict requirements around assessment and disclosure. We suggest you seek legal advice prior to commencing to provide credit services.

If your proposed business does require an ACL, and you do not meet the requirements to be an RM set out in Regulatory Guide 206, then ASIC is unlikely to grant you an ACL unless you hire a suitably qualified person. An alternative would be to approach an existing ACL holder and seek authorisation as an authorised credit representative. If you found a licensee willing to authorise you, then you could work up to two years of problem-free experience while studying for the Certificate IV. You could then consider applying for your own ACL when you meet ASIC’s requirements.

Please feel free to contact us if you require further information.

Author: Paul Derham

Co-contributor: Megan Jaksa

 

 

[Megan Jaksa]

As you would expect, it is very difficult to advise on what type of authorisations will be required without knowing more.  Generally if a licensee is only promoting another licensee’s products they will usually require an advice authorisation and possibly some dealing authorisations depending on the nature of their activities.  Those advice and dealing authorisations would be with regard to the financial products offered or issued by the other licensee.  You should read ASIC’s Regulatory Guide 36 which discusses the licensing requirements for financial product advice and dealing.

We typically help people like you work out the exact authorisations required in around one to three hours of consultation.  Please don’t hesitate to contact our office on +613 9670 8200 if you have any further queries.

 

 

Author: Paul Derham

Co-contributor: Megan Jaksa

 

[Megan Jaksa]

Hi Manish,

 

You are correct that the licensing and the registration are seperate areas. The question of whether you require an AFSL, if a managed investment scheme (MIS) must be registered and the requirement to issue a PDS are interrelated but all need to be addressed seperately.

 

An entity (either a person or a corporate entity) will generally require an AFSL if they carry on a financial services business within Australia under s911A of the Corporations Act 2001. This generally includes operating a MIS and dealing in interests in a MIS. You are exempt from this requirement if you act as a representative of an AFSL licensee.

 

A MIS may not have to be registered if it has less than 20 members and the entity promoting the scheme is not in the business of promoting such schemes (see s301ED of the Corporations Act 2001). A MIS also doesn’t need to be registered if the issue of interests in the MIS does not require a PDS.

 

A MIS may not require a PDS to be issued if the scheme is offered soley to wholesale investors or if it does not breach 20 purchasers or $2 million within a 12 month period and is offered by personal offer only (see s1012E of the Corporations Act 2001).

 

There are exemptions to each of these requirements depending on your business. We recommend seeking independent legal advice to ensure you are meeting all of your requirements prior to embarking on a new business venture.

 

Please feel free to contact us if you require further clarification.

 

Author: Tim Nethercote

Co-contributor: Megan Jaksa

 

[Author]

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