Providing financial services on behalf of a person who carries on a financial services business

Offence title:

Providing financial services on behalf of a person who carries on a financial services business

Act:

911B Corporations Act

Offence:

(1)   A person can only provide a financial service on behalf of another, who carries on a financial services business if one of more of the following apply:

(a)   these conditions are satisfied:

                                           i.         the principal holds an Australian Financial Services Licence (AFSL) covering the service; and

                                         ii.         the person is an employee or director of the principal or of a related body corporate of the principal; and

                                        iii.         the person is not an employee or director or authorised representative, of any other person who carries on a financial services business and who is not a related body corporate of the principal; and

                                        iv.         the provider is not an employee or director, or authorised representative, of a related body corporate of a person of the kind mentioned in subparagraph (iii);

(b)   these conditions are satisfied:

                                           i.         the principal holds an Australian Financial Services Licence (AFSL) covering the service; and

                                         ii.         the provider is an authorised representative of the principal; and

                                        iii.         the authorisation covers the provision of the service by the provider; and

                                        iv.         in the case of a person who is an employee or director of any other person (the second principal) who carries on a financial services business, or of a related body corporate of such a second principal—if the provider provides any financial services in this jurisdiction on behalf of the second principal, the provider does so as an authorised representative of the second principal;

(c)    these conditions are satisfied:

                                           i.         the principal holds an Australian Financial Services Licence (AFSL) covering the service; and

                                         ii.         the person is an employee of an authorised representative of the principal; and

                                        iii.         the authorisation covers the provision of the service by the authorised representative; and

                                        iv.         the service is the provision of a basic deposit product or of a facility for making non-cash payments (see section 763D) that is related to a basic deposit product, or is the provision of a financial product of a kind prescribed by regulations made for the purposes of this subparagraph;

(d)   the provider holds their own Australian financial services licence covering the provision of the service;

Note: However, in general a financial services licensee cannot be the authorised representative of another financial services licensee: see s. 916D and 916E.

(e)   if the principal provided the service, the principal would not need an Australian financial services licence because the provision of the service would be exempt under subsection 911A(2).

Note 1: Also, a person must not provide a financial service on behalf of another person contrary to a banning order or disqualification order under Division 8.

Note 2: Failure to comply with this subsection is an offence: s. 1311(1).

(2)   Paragraphs (1)(a), (b) and (c) do not apply if the person is a financial services licensee, unless the principal is an insurer and the provider is acting under a binder given by the principal.

(3)   If (1)(d) applies, then, for the purposes of the other provisions of this Chapter, the service is taken to be provided by the provider (and not by the principal) unless regulations made for the purposes of this subsection provide otherwise.

(4)   A person contravenes this subsection if the person contravenes subsection (1).

Note: This subsection is a civil penalty provision: s.1317E.

Penalty:

(1)   5 years imprisonment

Summary/Indictable/mixed:

Mixed

Jurisdiction:

Local, District or Supreme Court

How committed:

A managing director, having read the profit and loss statement, is aware the company has no assets, but continues to order stock to try to trade out of the financial position, aware that the income will not be due before the payment required for the stock ordered.

Important note:

(3A) For the purposes of an offence based on subsection (3), absolute liability applies to paragraph (3)(a).

(3B) For the purposes of an offence based on subsection (3), strict liability applies to paragraphs (3)(aa) and (b).

(3)   The provisions of Division 4 of this Part are additional to, and do not derogate from, Part 9.4B as it applies in relation to a contravention of this section.