The Australian Securities and Investments Commission (ASIC) has appealed certain findings in the recent decision in Australian Securities and Investments Commission v BPS Financial Pty Ltd [2024] FCA 457 (BPS Financial Decision) in relation to the scope of the authorised representative exemption. The authorised representative exemption is commonly relied upon and allows a person or entity to provide a financial service under the Corporations Act on behalf of the holder of an AFS licence without having to hold an AFS licence itself.
In the BPS Financial Decision, the Federal Court held that:
- in order to rely on the intermediary authorisation exemption under section 911A(2)(b), the product provider must be a separate person from the person making the offers. This is consistent with ASIC's position; and
- a person did not need to hold an Australian financial services licence ("AFS licence") to 'issue' a financial product during a particular period where it was appropriately authorised to provide the relevant financial services on behalf of an AFS licensee. This is not consistent with ASIC's long-standing position that the authorised representative exemption cannot be used by an authorised representative to issue a financial product.
ASIC's long-standing position, as outlined in ASIC Regulatory Guide 36 and Information Sheet 251, has been that the authorised representative exemption is only available to persons acting as an "agent" of the AFS licensee and it cannot be relied upon if the person is acting as a "principal" by offering or issuing the particular product. However, in the BPS Financial Decision, Her Honour found the exemption is available to an authorised representative regardless of whether it is acting as an agent for the AFS licensee or as a principal.
ASIC has since appealed this decision on grounds that Her Honour erred in holding that:
- BPS Financial was exempt under s 911A(2)(a) of the Corporations Act from the requirement to hold an AFS licence because it had an Authorised Representative Agreement; and
- an authorisation, for the purposes of s 916A, can authorise a person (in this instance BPS Financial) to issue, on behalf of an AFS licensee, a financial product of which the AFS licensee is not the issuer.
ASIC's appeal seeks to clarify whether the authorised representative exemption may be relied upon by the issuer of a financial product. The appeal could have significant implications for how issuers structure their licensing arrangements.
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