An Australian financial services licensee may appoint โauthorised representativesโ to provide specified financial services on its behalf.
Acting as an AR can be a cost effective way of operating a financial services business although most insurers require their MGAs & TPAs to hold their own AFSL. This is due to the risk that the AR presents to the insurer’s Licence.
AR networks continue to be used within the Insurance Broking community however due diligence & compliance monitoring is being strengthened.
There are regulatory requirements for appointing ARs & notifying ASIC. There are also rules & limitations in appointing sub-authorised representatives. Notification requirements also apply in respect of when an AR ceases to be authorised. These requirements should be captured in the Licenseeโs compliance manual.
In addition, the Licensee, if a subscriber to the GI Code or Insurance Brokers Code, will also have Code obligations in respect of the conduct of its ARs (GI Code see Parts 3-5 & Brokers Code see Part 8).
Generally, the Licensee is responsible for the training, competency & conduct of its ARs & therefore should have a Monitoring & Supervision Program in place. This benefits & protects both the Licensees & Authorised Reps business.
๐ถ๐๐๐๐๐๐๐๐๐๐ ๐๐ ๐๐ ๐จ๐๐๐๐๐๐๐๐๐ ๐น๐๐๐๐๐๐๐๐๐๐๐๐๐
In addition to meeting the obligations of the Licensee, ARs have a number of independent obligations, including:
- Be appointed in writing as an Authorised Representative of the Licensee ;
- Not hold out that they have an AFS Licence. In this regard, the AR should include their AR number & disclose the relationship with the Licensee in all business documents & on their website;
- Provide disclosure documents (FSG, PDS) as required when the General Insurance Products are provided to Retail clients;
- Provide details of remuneration in an FSG;
- Keep records of insurance transactions;
- Comply with hawking prohibitions (retail clients) & misleading & deceptive conduct provisions;
- Ensure they act within the scope of authority given; &
- Comply with Product design & distribution requirements & TMD (when financial services are provided to retail clients).
๐ผ๐ช๐ฉ๐๐ค๐ง๐๐จ๐๐ ๐๐๐ฅ๐ง๐๐จ๐๐ฃ๐ฉ๐๐ฉ๐๐ซ๐ ๐๐ค๐ข๐ฅ๐ก๐๐๐ฃ๐๐ ๐ข๐๐๐จ๐ช๐ง๐๐จ
It follows from the above, that the best practice is for the Authorised Representative to have its compliance measures captured in a Compliance Manual. The Manual should be tailored to the ARs business model & way of working & dovetail with the Licenceeโs compliance requirements.
Speak to me if you are an Authorised Representative requiring assistance with your compliance requirements or if you are an AFS licensee requiring assistance with your AR monitoring & supervision program.