The Corporations Amendment Regulations that implement the new limited financial services licence regime for accountants were registered on 4 June 2013. The limited Australian Financial Services Licence (LAFSL) will be available from 1 July 2013, and will replace the current accountants’ exemption which allows accountants to give limited advice on the establishment and operation of SMSFs.
The existing accountant’s exemption will be repealed from 1 July 2016, so accountants will need to either hold an LAFSL, or be a representative of the holder of an LAFSL, in order to give advice about SMSFs, or to give advice about contributions or pensions under a superannuation product.
The LAFSL will also permit accountants to provide ‘class of product’ advice to clients on:
- superannuation products;
- basic deposit products;
- general and life risk insurance;
- securities; and
- simple managed investment schemes.
‘Class of product’ advice will allow accountants to give general strategic advice on these asset classes: they will not be permitted to give specific product advice.
There will be a streamlined application process for accountants wanting to apply for an LAFSL between 1 July 2013 and 30 June 2016. During this transitional period, accountants with a Public Practice Certificate issued by CPA Australia Limited or the Institute of Public Accountants, or a Certificate of Public Practice issued by the Institute of Chartered Accountants, will be deemed to have the necessary experience to provide advice under the LAFSL, although they will still be required to demonstrate knowledge of the financial services covered by the LAFSL. However, they may be required to undertake a ‘knowledge review’ within three years of the licence being granted (if requested to do so by ASIC).
After this transitional period, accountants applying for an LAFSL will be required to demonstrate that they satisfy the experience requirements as well as the knowledge requirements.
Accountants who elect to become licensed under the LAFSL will be subject to the requirements in Chapter 7 of the Corporations Act 2001, which requires advisors to comply with certain disclosure obligations (such as providing a Financial Services Guide and Statement of Advice to clients) and to act in the best interests of clients. However, where the holder of the LAFSL is not providing product recommendations (except in relation to SMSFs) and is not handling clients’ money, they can lodge an annual compliance certificate in lieu of engaging an auditor annually.
From 1 July 2019, licensees will be required to comply with the full requirements of section 912A of the Corporations Act 2001 including having:
- adequate arrangements for managing conflicts of interest;
- adequate financial, technological and human resources to provide the financial services under the limited form AFSL;
- a dispute resolution system in place including membership of an external dispute resolution scheme; and
- adequate risk management systems.
We expect that the LAFSL application process will be similar to the existing Australian financial services licensing application regime, which is based on a few key documents, including a Business Description Statement and a Table of Organisational Expertise that sets out the expertise of the persons nominated as Responsible Managers for the applicant.