Australian regulator takes action over illegal dual licensees
Fifty-eight Australian financial services (AFS) licensees have had their authorisation revoked after ASIC found they were also authorised representatives of other AFS licensees.
The move follows a review by the Australian Securities & Investments Commission. ASIC investigated 65 cases where AFS licence holders had also been appointed as authorised representatives by another AFS licensee. Of the 65 cases investigated, ASIC found that 58 were in breach of the law.
Under the Corporations Act, an AFS licensee cannot be the authorised representative of another AFS licensee - with the only exceptions being general insurance underwriting agents and brokers operating under a binder given by an insurer.
In circumstances where an authorisation has been granted to one AFS licensee by another, ASIC is concerned that licensees may not have appropriate compliance measures in place, resulting in potential risks to consumers.
As an example of the risks that could be associated with these dual licensees, ASIC pointed out an AFS licensee may not maintain professional indemnity insurance or membership of an external dispute resolution scheme because they are operating as an authorised representative of another licensee.
Another issue is because the licensee's authorisation is actually void under the law, the licensee providing advice as an authorised representative will not have access to their AFS licensee's professional indemnity insurance or external dispute resolution scheme.
ASIC notes that AFS licensees to check ASIC's professional registers prior to granting a authorisation to new representatives to ensure that they do not authorise a person or entity that already holds an AFS licence. AFS licensees are encouraged to adopt this practice as part of their onboarding process. AFS licensees wanting to become authorised representatives must give up their licence or take necessary steps to ensure that they are not in breach of the law.
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