06 June 2025
The recent decision of the Full Court of the Federal Court of Australia in Australian Securities and Investments Commission v BPS Financial Pty Ltd [2025] FCAFC 74 (ASIC v BPS) has provided important guidance on the operation of the ‘authorised representative’ Australian financial services licence (AFSL) exemption. This exemption is frequently used by those in the funds and wealth management sectors.
BPS had been appointed as an ‘authorised representative’ by (at different times) two separate holders of AFSLs. In commencing proceedings, ASIC had contended, amongst other things, that the ‘authorised representative’ AFSL exemption in section 911A(2)(a) of the Corporations Act 2001 (Cth) (Corporations Act) could not be relied upon by BPS as an ‘authorised representative’ when BPS was issuing a financial product.
ASIC’s contention in this regard is consistent with ASIC’s long-standing view in ASIC Information Sheet 251 (November 2020)(INFO 251). Notably, a key focus of INFO 251 is the issue of interests in an unregistered ‘managed investment scheme’ (a ‘financial product’ under section 764A(1)(ba) of the Corporations Act), which is a different type of financial product to the facility for making ‘non-cash payments' which was the subject of these proceedings (a ‘financial product’ under section 763D of the Corporations Act). INFO 251 sets out ASIC’s view that the ‘authorised representative’ AFSL exemption can apply to a person ‘only if the person is acting as a representative of a principal’ and that ‘[t]he action of issuing, varying or disposing of an interest in a scheme as a trustee is, by its nature, the action of a principal’.
The Court disagreed with ASIC’s contention on this point at first instance, Downes J holding that BPS, as an ‘authorised representative’ of an AFSL holder, was exempt under section 911A(2)(a) of the Corporations Act from the requirement to hold an AFSL even when BPS was issuing a financial product. The Court found for ASIC in other aspects of ASIC’s case.
ASIC appealed on two grounds related to section 911A(2)(a) of the Corporations Act and, on appeal, the Full Court (Collier, Markovic and Shariff JJ) unanimously held in ASIC v BPS that in the particular facts and circumstances of this case, the section 911A(2)(a) AFSL exemption was not available to BPS as ‘authorised representative’ when BPS was issuing a ‘financial product’.
The Full Court found that BPS’s conduct in relation to issuing the ‘financial product’ was not that of a ‘representative’, but rather when issuing a ‘financial product’ BPS done so on its own behalf. While the Full Court did not consider it necessary to decide whether an ‘authorised representative’ could be an issuer of a financial product, their Honours did examine factors relevant to considering whether BPS was acting in a ‘representative capacity’ in providing financial services on behalf of an AFSL holder. These factors are important for fund managers and others in the context of AFSL arrangements, whether they are acting as an ‘authorised representative’ or are an AFSL holder.
We consider these issues in further detail below.
At first instance, Downes J accepted certain of ASIC’s contentions but rejected ASIC’s contention that BPS had not been an ‘authorised representative’ at relevant times, her Honour holding that:
Her Honour held that the ‘authorised representative’ exemption in section 911A(2)(a) applies to a person who provides a financial service where:
Where the above conditions are satisfied, her Honour held:
Given this, her Honour held that BPS was exempt from the requirement to hold an AFSL under the ‘authorised representative’ exemption in section 911A(2)(a) during the relevant period where it was expressly authorised by the AFSL holder (in this case PNI Financial Services Pty Ltd (PNI)) to issue a financial product and give general financial product advice in relation to that product.
ASIC advanced two grounds on appeal to the Full Court:
ASIC’s argument on appeal was framed differently to its arguments at first instance. On appeal, ASIC submitted that the ‘authorised representative’ exemption in section 911A(2)(a) contains ‘an essential representative capacity requirement’ with the consequence that a person cannot be an authorised representative of an AFSL holder if the representative itself acts as issuer of the financial product.
The Full Court upheld ASIC’s appeal. In doing so, and finding that the primary judge had failed to consider the preliminary question of whether BPS was in fact acting in its capacity as an authorised representative of PNI, the judgment of Collier, Markovic and Shariff JJ in ASIC v BPS makes it clear that the Full Court did not find it necessary to provide a view on whether an authorised representative may issue a financial product.
Their Honours helpfully set out five factors that led the Full Court to find that BPS was not issuing the ‘financial product’ in its capacity as a ‘representative’ of PNI, but rather BPS was issuing the ‘financial product’ in its own right. These factors were that:
In light of this, the Full Court held that BPS was unable to rely on the ‘authorised representative’ exemption in section 911A(2)(a) of the Corporations Act. The Full Court considered that, in issuing the ‘financial product’, BPS was acting on its own behalf and not acting as a ‘representative’ of PNI, and therefore BPS was required to hold its own AFSL. The Court set aside the primary judge’s orders and held that BPS had contravened section 911A(1) of the Corporations Act.
[1] The authorities emphasise that the phrase ‘on behalf of’ does not have a strict legal meaning and may apply to a wide variety of relationships beyond an agency relationship: ASIC v BPS at [141].
[2] ASIC v BPS. Notably, too, the fact that the authorised representative agreements do not use the words “on behalf of” does not matter, because each agreement identified itself as being “an authorisation for the purposes of section 916A(1) of the Corporations Act” and there is no required form of authorisation other than one authorising the recipient to provide a specified financial service or financial services on behalf of the licensee:.
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