Full Federal Court weighs in on Australian financial services licences and authorised representatives

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.

Key takeaways

• Arguably, the Full Court’s decision in ASIC v BPS suggests that the issuing of a financial product by an authorised representative is not inherently problematic, as was found by the primary judge.
  
  
• While no strict test for what constitutes acting in a ‘representative capacity’ was set out by the Court, the five factors used to establish that BPS was not acting in a ‘representative capacity’ provide useful examples of what the Court will consider.
  
  
• With a view to relying on the ‘authorised representative’ AFSL exemption, it would be prudent for ‘authorised representatives’, regardless of the financial services they are authorised for, to be mindful of the five factors that were fatal to BPS’ case.

Background

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.

The decision at first instance

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:

• ASIC’s submission that a person can only act ‘on behalf of’ an AFSL holder as part of a principal-agent relationship finds no support in section 911A(2) of the Corporations Act, in the authorities relied upon by ASIC,[1] or in the Corporations Act more broadly.
  
  
• ASIC’s submission that the action of issuing a financial product is necessarily the action of a principal is incorrect, as ASIC’s submission is based on the underlying premise that, to be a representative, a person must be the agent of the AFSL holder.
  
  
• In exchange for being responsible for the conduct of the ‘authorised representative', the Corporations Act leaves the AFSL holder free to decide what an authorised representative acting ‘on its behalf’ will look like in any given case.

Her Honour held that the ‘authorised representative’ exemption in section 911A(2)(a) applies to a person who provides a financial service where:

• the person has been given a written notice by a financial services licensee authorising the person, for the purposes of Chapter 7 of the Corporations Act, to provide the specified financial service on behalf of the licensee; and
  
  
• the financial services licensee holds an AFSL that covers the provision of the financial service.[2]

Where the above conditions are satisfied, her Honour held:

• a person may be an ‘authorised representative’ of an AFSL holder even if the person is issuing a ‘financial product’ as an ‘authorised representative’; or
  
  
• an AFSL holder may appoint an ‘authorised representative’ to provide ‘financial services’ in respect to a financial product for which the AFSL holder is not the issuer.

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’s appeal to the Full Court of the Federal Court of Australia

ASIC advanced two grounds on appeal to the Full Court:

• BPS could not rely on the ‘authorised representative’ exemption; and
  
  
• BPS was not in fact acting as a ‘representative’ of the relevant AFSL holder, PNI, during the relevant period.

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:

• BPS had developed the ‘financial product’ before BPS had begun dealing with or had any involvement with PNI. The Full Court suggested that PNI should have had some involvement with the issue of the financial product although did not consider this issue further;
  
  
• BPS had purported to act as an ‘authorised representative’ of another AFSL holder prior to its relationship with PNI, but the primary judge found that BPS could not rely on the ‘authorised representative’ exemption during that time;
  
  
• BPS had sought out AFSL holders because BPS itself could not issue the ‘financial product’ without an AFSL (a practice referred to as ‘AFSL provisioning’ by the Full Court);
  
  
• the relevant documents relating to the issue of the ‘financial product’ (including the Product Disclosure Statement, Financial Services Guide and Terms of Use) were prepared and issued by BPS prior to its dealings with PNI, and were clear that the contractual relationship was between BPS and its users. There were no significant changes to these documents when PNI became involved. The mere mention of the fact that BPS was an authorised representative of PNI in some of the documents was insufficient to overcome the fact that BPS was dealing with its users in its own right and not on behalf of another entity; and
  
  
• that PNI had taken steps to monitor services provided by BPS (including by preparing a compliance plan and holding monthly compliance meetings), would not lead to a conclusion that BPS was providing ‘financial services’ in its capacity as ‘authorised representative’ given PNI’s obligations arose whether or not BPS was acting in its capacity as ‘authorised representative’. In any case, PNI’s measures were described as ‘less formal’ and were adopted after BPS had already prepared its product disclosure statement.

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.

For consideration of implications of the decision, including considerations for fund managers and the financial services industry, read our follow-up analysis here.

^{[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:.}