ARTICLE
4 September 2024

ASIC Seeks To Clarify The Scope Of The "Authorised Representative" Exemption

KG
K&L Gates LLP

Contributor

At K&L Gates, we foster an inclusive and collaborative environment across our fully integrated global platform that enables us to diligently combine the knowledge and expertise of our lawyers and policy professionals to create teams that provide exceptional client solutions. With offices spanning across five continents, we represent leading global corporations in every major industry, capital markets participants, and ambitious middle-market and emerging growth companies. Our lawyers also serve public sector entities, educational institutions, philanthropic organizations, and individuals. We are leaders in legal issues related to industries critical to the economies of both the developed and developing worlds—including technology, manufacturing, financial services, health care, energy, and more.
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...
Australia Finance and Banking

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.

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.

Find out more and explore further thought leadership around Finance Law and Banking Law

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More