Employed financial advisers in Australia could be personally liable for Best Interests Duty breaches post-Future of Financial Advice (FOFA), and could be liable for up to A$200,000 in fines, regardless of whether or not they are the licensee, once FoFA reforms kick in, according to Charmian Holmes, solicitor director at The Fold Legal.
Salaried advisers, however, will enjoy the protection of their licensee, Holmes said.
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"There is actually no legal requirement for employed advisers to be appointed as ARs. They can provide financial services under their employer’s AFS licence without it; if an employed adviser is not an AR, these fines won’t apply to them," Holmes said.
Violations of the Best Interests Duty include failing to act in the best interests of the client, giving advice that is not appropriate for the client and failing to warn the client during the needs analysis phase about the impact of incomplete or inaccurate information.
Holmes warned that under an AR arrangement, the individual adviser will have to deal with the Australian Securities and Investments Commission themselves in the event of allegations of non-compliance, and could potentially even face the prospect of bankruptcy in some cases.
"Professional indemnity insurance doesn’t cover these fines so, my advice to them is to ask their licensee to terminate their appointment as an authorised representative right now," Holmes said.
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