Authorised Representatives or Distributors
Licensees may authorise a company or an individual as their authorised representative to provide financial services on their behalf. An authorised representative can be given authorisation to give personal advice.
There are, however, specific procedures and issues to consider when appointing an authorised representative, including:
- Authorised representatives must be notified and registered with ASIC.
- They must display their AR number and who they are acting for on all business documentation. They must clearly display that they are not operating as a principal.
- They must operate under a written agreement.
- They must issue their own personalised FSG declaring who they act for and remuneration received.
- Authorised representatives can be authorised to act for multiple licensees providing each licensee has consented. This is cross endorsement.
- A licensee must ensure their PI arrangements cover their authorised representatives.
- With the agreement of the licensee, an authorised representative can sub-authorise. However the sub-authorised can only give general advice.
- No client monies should be paid into the authorised representative’s account. It must all go into the licensee’s trust account.
Licensees must monitor, supervise and train their authorised representatives as they do their employees. Licensees need to ensure the qualifications and good fame and character of their authorised representatives. This includes police checks and the like.
Class order 05/1070 was included in the December 2005 amendments and allows for licensees to appoint distributors. The intention is to create distribution channels with travel agents, car dealers, real estate agents and the like.
The major advantage of appointing distributors as opposed to authorised representatives is that the distributor does not have to be registered with ASIC and they do not have to give a personalised FSG. Cross endorsement does not apply for distributors, which for some licensees gives them access to an authorised representative of another licensee who previously refused to cross endorse. A distributor of a body corporate can, with the agreement of the licensee, sub-authorise an individual or a specified class of individuals.
There are, however, specific procedures and issues to consider when appointing a distributor:
- A distributor cannot give any advice at all.
- A distributor must operate under a written agreement.
- The licensee is still responsible for the training, monitoring and supervision of the distributor.
- The distributor must tell the client who they act for, how they are remunerated and how they can access the dispute resolution scheme. This is usually addressed with minor alterations to the FSG.
- The licensee must maintain a register of their distributors.
- A distributor cannot give an oral FSG, hence a written FSG must be given prior to or during the insurance discussion.
- Licensees are responsible to ensure professional indemnity cover for the distributor.