The Australian Securities and Investments Commission has announced an amendment to Class Order CO14/923 which imposes new obligations upon authorised representatives (advisors) not only to keep records but to give licensees access to those records.

ASIC has modified section 912G Corporations Act by introducing section 912G(3)-(7), which includes a direct obligation on advisors to keep records and to give the records to licensees upon request.

Obligations on advisors

Section 912(G)(4) obliges each advisor not only to maintain records for a period of 7 years, but to also provide access to those records to the relevant licensee, regardless of whether the advisor is an authorised representative of the licensee at the time of request.

It is important to note that these obligations are in addition to the recordkeeping obligations imposed on licensees and continue even after the advisor ceases to be authorised by a licensee. These obligations remain unless the advisor has already given the licensee his clients' records.

If an advisor fails or refuses to comply with a proper request from a licensee for access to clients' records, that failure or refusal may constitute a breach of the Corporations Act, for which penalties may apply.

Obligations on licensees

Section 912(G)(3) also clarifies the obligation upon the licensee which is, in addition to ensuring that records are kept for a period of 7 years, that they must also ensure that the records are accessible by the licensee at all times during that period, in a way that enables the licensee to produce the records.

This obligation places the onus on the licensee to have systems in place that will enable the licensee to access the client records at all times. One method of complying with this requirement is to ensure that a centralised system of client management is in place throughout the licensee group, so that the advisor maintains all clients' records on the centralised system at the same time as the advisor’s own records.

Another method may be to oblige the advisor to provide the licensee with all clients' records at the time the advisor moves to another licensee, together with a written confirmation that all of the advisor’s clients' records have been provided to the licensee in accordance with section 912G(4)(b).

Problems and their solutions

Section 912G contains recordkeeping requirements for licensees when either those licensees or their advisors give personal advice to retail clients. Licensees must ensure that records are kept that show that they are fulfilling the 'best interest' duties and related obligations that the Act imposes on them. The records must be retained for at least 7 years.

Under current arrangements, some advisors keep clients' records on behalf of the licensees, but there are many instances in which the advisor has moved to a new licensee and the former licensee is unable to review the advice because that licensee no longer has access to those records or the advisor is unwilling to provide access to them. If someone complains about advice that an authorised representative gave under the former licensee, it difficult for anyone to determine whether the advice complies with the law or whether the client has suffered a loss.

Section 912G(3)-(7) seeks to alleviate these problems by ensuring that both the advisor and the licensee are obliged to retain records and that the advisor must give access to those records to the licensee at all relevant times.

ASIC has inserted Section 912G into the Corporations Act through Class Order CO14/923.

* Gina Bozinovski can be reached on +61 7 3223 9102 or at gina.bozinovski@brhlawyers.com.au