The Importance of Authorised Representative Agreements

by HLK Group HLK Group

The Corporations Act2001 requires that all financial service providers and businesses must either hold an Australian Financial Services Licence (AFSL), or be an authorised representative (AR) or corporate authorised representative (CAR). To be an authorised representative it is a legislative requirement that you will need to sign an agreement with the licence holder, which is known as an Authorised Representative (AR) Agreement or Corporate Authorised Representative (CAR) Agreement.

The AR or CAR agreements are fundamental in setting out the boundaries in terms of both general details and specific issues governing the relationship between the licensee and authorised representative. It will contain information regarding:

Authorised Representative Entity Details

According to Sections 911A and 911B(1) of the Act, to provide financial services a person must either hold an Australian Financial Services Licence (AFSL) or operate as a director, employee and/or authorised representatives of an AFSL. Consequently, trusts cannot operate as a financial service business. Only natural persons, partnerships or body corporate that act as trustees (s761FA) may become an authorised representative of an AFSL.

The agreement may also specify individual that are sub-appointed if the entity is in reference to a partnership or body corporate.

Appointment and Revocation

Once the agreement is signed, the AR or CAR will be appointed by the licensee by notifying ASIC via their online service system, ASIC Connect. The agreement outlines the financial services which the representative is authorised to provide once they are appointed. This may be all or some of the services which the licensee is authorised to provide under the terms of their AFSL. The representative may only perform the services set out in the agreement from the date of appointment, and may not exceed the authorisations that were granted to them under the license terms. Licensees must notify ASIC of an authorised representative appointing within 15 business days.

Authorisations may also be revoked by the licensee or a licensee may cease an authorised representative. This is usually in reference to a termination clause as part of the AR or CAR agreement which would entail a breach not being remedied within a certain period or either party issuing notice to the other to terminate the agreement. ASIC must be notified of ceased authorisations or representatives within 10 business days via ASIC Connect.

Education and Training

Licensees have to ensure that their representatives are competent and adequately trained to provide the financial services offered under the licence authorisations. Training has to be in line with the ASIC Regulatory Guide 146 (RG146) and must be in accordance with the services and products they are authorised to provide.

Rights and Obligations

The authorised representative agreement must be submitted in writing and it must set out the details of the relationship. The document should contain all the various elements of the relationship, including the following rights and obligations:

Legal and compliance requirements
Fees and remuneration
Confidentiality
Client documentation approval and implementation
Appointment of sub-authorised representatives
Professional Indemnity Insurance coverage
Dispute resolution
Activity and breach reporting
Issuing of marketing material and advertising
Training

Both licensees and representatives should place a high value on this document, and therefore, they should carefully consider all the aspects thereof before they sign. Compliance with the various financial services laws ensures that both the licensee and the authorised representative are protected in fulfilling their part of the deal.

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Created on Dec 31st 1969 18:00. Viewed 0 times.

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