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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Financial planners may think twice about becoming ARs with new FOFA reforms

18 June 2013

There has been concern from financial planners that if they wish to become authorised representatives once FoFA reforms come into effect on July 1, they may be exposed to extensive personal liability.

According to Charmian Holmes, solicitor director at The Fold Legal (the Fold) employed financial planners who are authorised representatives can be held personally liable for serious breaches of the Best Interests Duty and may face up to $200,000 in fines when reforms come in affect after July 1.

Holmes, has said that financial planners, “should therefore consider the necessity of becoming ARs. She also stated that,“there is actually no legal requirement for employed advisers to be appointed as ARs. They can provide financial services under their employer’s AFS license without it. If an employed adviser is not an AR, these fines won’t apply to them.”

As professional indemnity insurance doesn’t cover these fines Holmes has offered this advice: “ask their licensee to terminate their appointment as an authorised representative right now and let them provide advice as an employee only.”

ASIC has outlined these breaches as –  if they violate the Best Interests Duty by: failing to act in the best interests of the client, giving appropriate advice for the client and failing to warn the client during the needs analysis phase about the impact of incomplete or inaccurate information, and not prioritising the client’s needs.

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