FSRA web wider than many think
TheAustralian Securities and Investments Commission’s (ASIC) licensing web will snare a growing number of unsuspecting professionals employed outside the realm of financial services, who may not be aware of their obligation to apply for an Australian Financial Services (AFS) licence.
Accountants, valuers, engineers, quantity surveyors and architects — indeed, anyone offering professional advice for inclusion in prospectuses for property trusts and syndicates — are all liable to feel ASIC’s regulatory gaze under the current terms of the Financial Services Reform Act (FSRA).
“Every day we are coming across organisations and individuals not involved in the formal business of funds raising or funds management, that are incredulous when they discover the Act may apply to them,” Teys McMahon Legal lawyer Greg McMahon says.
According to McMahon, property valuations appearing in prospectuses are a form of financial advice, and property valuers could thereby be required to hold an FSR licence, as could anyone who contributes their expertise to prospectuses.
“This is regulatory overkill, and people are reluctant to believe that the FSRA could apply to them,” McMahon says. “There are three options: many people won’t comply, some may outsource the licensing function, and others may try and get a licence, though this is a complex and expensive process,” he says.
Property developers and venture capitalists engaging in mezzanine funding or ‘excluded offers’, which raise funding from a limited number of investors, may also find themselves obliged to obtain FSRA licences if their fundraising activities are perceived by ASIC to be a form of funds management.
ASIC is already struggling to process licence applications from financial advisory industry participants, with only 71 applications being finalised since the FSRA came into effect in March 2002.
ASIC will need to start processing around 350 applications per month if it is to meet its two-year deadline, and now faces the additional task of licensing players outside the industry, McMahon says.
This is not a task that ASIC is necessarily happy to take on, but the commission has no legal basis on which to exclude outside players from the FSRA under its current terms, McMahon says
“ASIC needs to end the uncertainty and find a sensible resolution to confusion surrounding the FSRA,” he says.
Recommended for you
The Financial Services and Credit Panel has made a written direction after advice regarding non-concessional contributions meant an individual was forced to withdraw over $330,000 from their super.
Merchant Wealth’s David Haintz has described how the firm differs from the traditional private equity ventures jumping into Australia, and why M&A isn’t like Married at First Sight.
ASIC has been granted permission to shut down almost 100 websites running investment scams, with the Federal Court describing how its victims were “fattened like pigs to slaughter”.
An Adelaide-based financial planning and accounting firm is set to merge into Count Adelaide, aligning with Count’s ambitions to form a national footprint of scaled equity partnerships.
