Giving AFS and credit licensees information about their representatives
ASIC may give an Australian financial services (AFS) licensee or an Australian credit licensee (credit licensee) information we have about their representatives: see section 916G of the Corporations Act 2001 (Corporations Act) and section 73 of the National Consumer Credit Protection Act 2009 (National Credit Act).
This information sheet (INFO 250) outlines our approach to giving AFS and credit licensees (collectively, ‘licensees’) information about their representatives. It covers:
- What we can do under section 916G and section 73
- Information that we may give AFS and credit licensees
- Benefits of giving information to AFS and credit licensees
- When we may give information to AFS and credit licensees
- Procedural fairness obligations
- Examples of when we may give information to AFS and credit licensees
- Notification of our decision and right of review
- What AFS and credit licensees can do with the information
- AFS and credit licensee obligations
- How we respond to breaches of the law
We may, if we consider it appropriate, give information to a licensee about a person. However, we may only give this information if:
- it is about a person who we believe is, or will be, a representative of that licensee
- we believe, on reasonable grounds, that the information is true.
Note: See section 916G(1) of the Corporations Act and section 73(1) of the National Credit Act.
Information that we may consider giving to a licensee includes, but is not limited to:
- breach notifications and reports of misconduct from other licensees, industry associations or the public
- information from whistleblowers
- material produced in response to a notice (e.g. a notice to give a written statement under section 912C of the Corporations Act or section 49 of the National Credit Act)
- information and conclusions from our own surveillance activities
- intelligence provided by other regulators (e.g. the Australian Tax Office).
Depending on the nature of the information provided, we may need to make further inquiries to verify the accuracy of the information. We may also need to consider any submissions made by persons afforded procedural fairness: see Procedural fairness obligations below. The extent of these inquiries will depend on the nature of the circumstances and the information.
Giving information that we hold about a representative to their current licensee can help reduce industry-related compliance risks. This information can help licensees make informed decisions about their representatives and appropriately monitor their conduct. This will increase the likelihood that representatives receive the level of supervision and training from their licensees that they need to fulfil their role.
Knowing that we might disclose information to their licensee may also encourage representatives to be more transparent about their past conduct.
When we are considering giving information to a licensee, we will consider each case on its individual merits.
Before deciding to give the information to a licensee, we must:
- consider that it is appropriate to give the information
- reasonably believe that the information is true.
Determining whether it is appropriate to give information
Our decision about whether it is appropriate to give information about a representative to a licensee will depend on the circumstances of each matter. This will involve considering all the relevant factors, including:
- whether there is a regulatory benefit in giving the information to the licensee
- the seriousness of the information we have received concerning the representative
- whether the information will help the licensee meet its obligations under the Corporations Act or the National Credit Act
- any submissions made by the representative, and any other affected person, when they are afforded procedural fairness (see Procedural fairness obligations below).
Giving the information will help the licensee focus on areas where there is a higher chance of non-compliance. This enables the licensee to take an informed, risk‑based approach to monitoring and supervising its representatives. This is particularly the case when the information is from a former licensee’s report about the prior conduct of the representative.
Forming a reasonable belief that the information is true
If we decide to give the information to a licensee under section 916G or section 73, we must believe that the information is true. This means that:
- there must be ‘reasonable grounds’ for ASIC to form such a belief
- we must actually form that belief.
In this context, ‘belief’ is something more than a reasonable suspicion and something less than satisfaction beyond reasonable doubt.
If we hold concerns about the accuracy of the information concerning a representative, we may take steps to verify the information. We may, for example, ask the person who provided us the information to provide documentary evidence. It must be sufficient for ASIC to form a belief, based on reasonable grounds, that the information is true.
When forming a belief on whether the information is true, we will consider submissions made by the representative, and any other affected person, when they are afforded procedural fairness: see Procedural fairness obligations below.
When we are considering making a disclosure under section 916G or section 73, we will consider relevant procedural fairness obligations. Whether a particular person in a specific case must be afforded procedural fairness will depend on the circumstances. Generally, before we make a decision to give information, we must provide procedural fairness to a person who will be directly and materially adversely affected by the decision.
Giving information under section 916G or section 73 may have a direct, adverse effect on a representative’s reputation and livelihood. Therefore, when following the process to give information under these sections, we will typically provide the representative with an opportunity to be heard (e.g. to make submissions to ASIC about whether the information should or should not be disclosed). We will also typically provide this opportunity to any other person who is directly and adversely affected. Usually we will do this by inviting the person to make a written submission to ASIC.
There may be factors or circumstances, known only to the person who is directly affected, that are relevant to whether the information can or should be given to a licensee. The response from the affected representative (or anyone afforded procedural fairness) may therefore help to inform our decision about whether to give the information under section 916G or section 73.
For more information on the different considerations relevant to whether there is an obligation to provide procedural fairness, see Regulatory Guide 103 Confidentiality and release of information (RG 103).
Note: This information sheet is not aimed at circumstances where, as part of our regulatory work, we engage with licensees about the conduct of their representatives (e.g. as part of a surveillance or investigation activity).
Example 1: An ASIC surveillance raises compliance concerns about a financial adviser
Following a surveillance initiated by ASIC, we identify that a financial adviser representative appears to have breached the law. They appear to be routinely providing personal advice without keeping the necessary records. This indicates non-compliance with the best interests duty and related obligations. In addition, the adviser appears to have not complied with their ongoing training requirements.
The adviser now works for a new AFS licensee. The new licensee may not be aware of the potential compliance concerns from when the adviser was working for the previous licensee.
When we consider the appropriateness of giving information under section 916G to the adviser’s new AFS licensee, we will consider various factors. For example:
- the regulatory benefit – we will consider whether there is a regulatory benefit in giving the information to the new licensee and whether giving the information can help to increase compliance with the law. The adviser’s new licensee may not be aware of the adviser’s previous conduct and the concerns surrounding the adviser. Disclosing the information could improve the effectiveness of the new licensee’s ongoing training, monitoring and supervision of the representative. This may also reduce the risk of client loss or detriment
- the seriousness of the information received by ASIC – the concerns may be sufficiently serious to warrant the new licensee being made aware of them (so they can implement appropriate monitoring and supervision strategies), but not so serious as to warrant ASIC taking action to ban the adviser.
We also need to form a belief on reasonable grounds that the information is true before disclosing it under section 916G. We will also consider what the representative, and any other affected party who has been afforded procedural fairness, has to say about the matter: see Procedural fairness obligations above.
Example 2: An ASIC surveillance, following a report of misconduct, indicates potential non-compliance by a finance broker
We receive a report of misconduct, alleging that a finance broker representative provided a lender with misleading information as part of a loan application. The finance broker is now a representative of a different credit licensee. The new licensee may not be aware of the potential compliance concerns from when the representative was working for the previous licensee.
We undertake a surveillance, which indicates potential misconduct by the representative. In this situation, we may give the information regarding the alleged misconduct to the representative’s current licensee. As with Example 1 above, we must be satisfied that it is appropriate to give the information. We must also form the belief, on reasonable grounds, that the information is true. We will also take into account submissions made by any persons afforded procedural fairness: see Procedural fairness obligations above.
Example 3: A breach report has been provided by an AFS licensee
An AFS licensee has provided ASIC with a breach report about a financial adviser who no longer works for that licensee. The adviser is now authorised by another AFS licensee. We have not conducted a surveillance.
The breach report may be sufficient for ASIC to have reasonable grounds to believe the information is true, without investigating further. However, this would depend on a range of circumstances, including:
- what the breach report says
- any other information that we have about the accuracy of previous breach reports made by that AFS licensee
- what has been raised in the procedural fairness process.
If we decide to give information about a representative to a licensee, we will notify the representative of our decision. We will also notify them of their right to seek a review of the decision by the Administrative Appeals Tribunal.
We will give the licensee the information no earlier than two business days after we have notified the representative, and any affected third party, of our decision.
There are strict limitations imposed on how licensees can use and disclose the information we give them under section 916G and section 73. A licensee may only use or record the information, or give it to another person, for a purpose in connection with the licensee when:
- making a decision about what action, if any, to take in relation to the representative as a consequence of receiving the information, or
- taking action as a consequence of making that decision.
The licensee is not obliged to act on the information. For more information on the limitations, see sections 916G(2)–(7) of the Corporations Act and sections 73(2)−(10) of the National Credit Act.
We remind licensees of:
- their general obligations to take reasonable steps to ensure that their representatives comply with financial services laws or credit legislation
- their obligations to monitor and supervise representatives
- the importance of carrying out appropriate background and reference checks before they appoint new representatives.
In thinking through the processes to meet their monitoring and supervision obligations, AFS licensees who provide financial product advice should read Report 515 Financial advice: Review of how large institutions oversee their advisers (REP 515). We consider the checklist of issues to consider when conducting background checks (contained in Appendix 2) to be particularly helpful.
We carefully consider how to respond to all potential breaches of the law. To ensure that we direct our finite resources appropriately, we consider a range of factors when deciding whether to investigate and take action in accordance with the law. The specific factors we consider will vary according to the circumstances of the case.
Information Sheet 151 ASIC’s approach to enforcement (INFO 151) explains how we approach our enforcement role and why we respond to particular types of potential breaches of the law in different ways. Exercising ASIC’s powers under section 916G and section 73 is one of these ways.
Where can I get more information?
- RG 57 Notification of rights of review
- RG 78 Breach reporting by AFS licensees
- RG 103 Confidentiality and release of information
- RG 104 Licensing: Meeting the general obligations
- RG 205 Credit licensing: General conduct obligations
- INFO 9 ASIC decisions: Your rights
- INFO 151 ASIC’s approach to enforcement
- REP 515 Financial advice: Review of how large institutions oversee their advisers
- Contact us online or call 1300 300 630.
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice.
You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 250 (INFO 250), issued in March 2021.