In light of the recent Federal Court proceedings against Lanterne Fund Services Pty Ltd ("Lanterne") and ASIC's allegation that Lanterne failed to comply with its obligations as the holder of an Australian Financial Services Licensee ("AFS Licensees"), it can be expected that ASIC will increase its surveillance of AFS Licensees and Australian Credit Licensees' monitoring and supervision of representatives.
If you are an AFS Licensee or an Australian Credit Licensee which authorises representatives to provide financial services or engage in credit activities on your behalf, you have a range of obligations in relation to these representatives.
Your obligations as an AFS Licensee or an Australian Credit Licensee (together, "Licensees") include:
- Implementing appropriate risk management procedures: This can include conducting appropriate screening, reviewing existing marketing or promotional material, reviewing qualifications held and activities currently engaged in by the proposed representative;
- Training of Representatives: Licensees have an obligation to ensure their representatives are appropriately trained. This can be done by implementing appropriate training plans for all individuals, assessing progress and identifying any deficiencies in the representative's knowledge or skills. Record keeping in relation to training undertaken and periodic reviews of training plans should also be kept;
- Compliance with the law: Licensees are
responsible for ensuring their representatives comply with the law
and any licence conditions. Licensees should have:
- robust procedures,
- clear communication and reporting lines with all representatives, and
- regular and systemic monitoring and supervisory practices.
- Record Keeping: Record keeping is crucial – Licensees should be able to provide clear evidence of the procedures they have in place in relation to onboarding, training, compliance, monitoring, communication and reporting.
This is not a substantive list. The Lanterne case highlighted a number of areas where ASIC indicates Licensees can improve their practices in relation to representatives. It's important for all Licensees who authorise representatives to consider their current monitoring practices and what can be improved.
Further Reading
- ASIC issues civil penalty proceedings against Lanterne Fund Services
- Notice of Filing
- AFSL Representatives Policy
- AFSL Authorised Representatives Manual
- AFSL Training Policy
- ACL Training Policy
- ACL Credit Representatives Manual
- ACL Representative Policy
- Monitoring Authorised Representatives – Take-aways from the Lanterne Case