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Australia: an Australian Financial Services Licence is a privilege not a right.

BIScom Subsection: 
Editorial Staff

In an unusual case, an Australian who applied to the Australian Securities and Investments Commission (ASIC) for an Australian Financial Services Licence (AFSL) was refused. He appealed to the Administrative Appeals Tribunal (AAT) which has upheld the decision. That, of itself, is uncommon but it's the grounds for refusal that turn it into a story.

But first some interesting information about information.

ASIC, not being satisfied that this was done, refused (as distinct from rejected) the application. The distinction is important: an application might be rejected because it was patently incomplete (for example boxes left empty) i.e. a quantitative decision but a rejection means that information was provided but was insufficient, i.e. a qualitative decision.

When such a matter appears before the Tribunal, ASIC is almost a witness rather than a party because although, legally, the matter comes before the Tribunal as an appeal, once it is there the Tribunal becomes, not a reviewer of ASIC's decision, i.e. it does not undertake what is tantamount to a judicial review, instead it sits as primary decision maker. "The Tribunal is not limited to reviewing ASIC’s, or in this case the delegate’s, decision for legal or other error, but rather conducts its own de novo assessment and determination of the matter." (see the assessment, para. 29). Furthermore "In undertaking this task, the Tribunal is entitled to consider all the material before it and is not limited to consideration of only the material that was before the delegate. Accordingly, the Tribunal is to decide what is the correct or preferable decision at the time it makes its decision, rather than at the time of the original decision. "

This is material because, while there must be grounds for appeal, once the appeal is accepted, any failure in process or other matter or thing arising from ASIC's original decision becomes immaterial to the Tribunal's decision. Watson't primary argument, the Tribunal said, was that ASIC did not conduct its process appropriately. In terms, the AAT told him to stop whingeing and present his application afresh so that the Tribunal could perform its obligations of considering the application as if it were a new application.

To summarise the long Assessment is something that Watson failed to do.

The conclusion was that there is "no reason to believe that the Applicant is not of good fame and character" but the Tribunal "is not satisfied that there is no reason to believe that the Applicant is likely to contravene the obligations that will apply under s 912A if the AFSL is granted" and, most tellingly "the Application was not made in accordance with s 913A of the Act."

So, as judges used to say, Watson had failed to "get all his ducks in a row."

Incidentally, ASIC's argument that Watson was not of good fame and character was a bit of a make-weight point. He had been disqualified from driving but was subsequently stopped and, on that occasion, too, had a blood-alcohol level above the legal limit. He was less than truthful about various aspects of that when inquiry was made. A more material point was that there was at best confusion and at worst dishonesty about what fees he made or did not make from past advice. This, ASIC argued, amounted to false or misleading statements. The Tribunal did not appear to consider this as an automatic barrier to the grant of a licence on the character test.

However, his apparent failure to understand the importance of accuracy in reporting and other form-filling did appear to be a factor that the Tribunal considered. The double negative in the finding that " it is not satisfied that there is no reason to believe that the Applicant is likely to contravene the obligations that will apply under s 912A if the AFSL is granted" avoids the pejorative implications if the double negative is removed (i.e. it would read "it is satisfied that there is reason to believe that the Applicant is likely to contravene the obligations") and therefore, by delivering a neutral position shows that the positive requirement (i.e. that there is no reason to believe...") cannot be established.

In relation to the Diploma issued by Mentor Education, Mentor was very clear in evidence it provided. Watson's application related to, inter alia, Self-Managed Superannuation Funds. Mentor told the Tribunal "Mentor Education’s advice to ASIC on 17 May 2017 was that to provide advice on SMSFs, both the Diploma of Financial Planning FNS50611 and SMSF certification would be required." The Tribunal said "Mentor Education did not suggest that the Applicant complete another of its own courses but specified generally that SMSF certification was required – which certification could be provided by any registered training organisation." Watson further argued that his previous appointment as "authorised representative of Merlea" was sufficient evidence saying "“this would not have happened if I did not have the appropriate background/knowledge etc.". The Tribunal said "The fact that the Applicant may have been an authorised representative of another licensee does not establish that the Applicant has the relevant knowledge." In fact, Merlea told ASIC that, so far as it was aware, Watson and / or his company had not, in fact, ever provided advise to any client. In short, experience counts as experience only if one actually has experience.

Further Reading: http://www8.austlii.edu.au/cgi...