ASIC has announced an amendment to Class Order CO14/923 which
imposes new obligations upon authorised representatives
(Advisers) to not only maintain records but to
provide access to those records to licensees.
ASIC has modified section 912G1 of the Corporations
Act by introducing new sections 912G(3)-(7), which
includes a direct obligation on Advisers to keep records and
give the records to the licensee if the licensee requests
Obligations on Advisers
Under section 912(G)(4), Advisers have a statutory obligation
to, not only maintain records for a period of 7 years, but to also
provide access to those records to a licensee, regardless of
whether the Adviser is an authorised representative of the licensee
at the time of request.
Importantly, these obligations are in addition
to the record keeping obligations imposed on licensees and continue
even after the Adviser ceases to be authorised by a licensee. These
obligations remain unless the client records have already been
given by the Adviser to the licensee.
If an Adviser fails or refuses to comply with a proper request
from a licensee for access to client records, then such failure or
refusal may constitute a breach of the Corporations Act, for which
penalties may apply.
Obligations on licensees
The new section 912(G)(3) also clarifies the obligation upon the
licensee which is, in addition to ensuring that records are kept
for a period of 7 years, they must also ensure that the records are
accessible by the licensee at all times during that period, in a
way that enables the licensee to produce the records.
This obligation places the onus on the licensee to have systems
in place which will enable the licensee to access the client
records at all times. One method of complying with this requirement
is to ensure that a centralised system of client management is in
place across the licensee group, so that all client records are
maintained by the Adviser on the centralised system at the same
time as the Adviser's own records.
Another method may be to oblige the Adviser to provide the
licensee all client records at the time the Adviser moves to
another licensee, together with a written confirmation that all of
the Adviser's client records have been provided to the licensee
pursuant to section 912G(4)(b).
Section 912G provides record keeping requirements for licensees
when personal advice is given to retail clients by either the
licensee or their Advisers. Licensees must ensure that records are
kept that demonstrate compliance of the best interest duties and
related obligations under the Act. The records must be retained for
at least 7 years.
Under current arrangements some Advisers retain client records
on behalf of the licensee. However, there are many instances where
the Adviser has moved to a new a licensee and the former licensee
is unable to review the advice as the licensee no longer has access
to those records or the Adviser is unwilling to provide access to
those documents. If a complaint is made in relation to advice
provided by the AR under the former licensee, it is then difficult
to determine whether the advice complies with the law or whether
the client has suffered a loss.
The new sections 912G(3)-(7) seeks to alleviate these issues by
ensuring that both the Adviser and the licensee have the
obligations to retain records and that the Adviser must give access
to those records to the licensee at all relevant times.
1Section 912G is inserted into the
Corporations Act by ASIC through Class Order CO14/923.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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