Strata Community Insurance Agencies Pty Ltd and Australian Securities & Investments Commission

This matter concerned an application by Strata Community Insurance Agencies Pty Ltd (Strata) to review a decision by the Australian Securities & Investments Commission (ASIC) to refuse an exemption from a requirement under the Corporations Act 2001 (Cth) (CorpAct). Strata sought to avoid the requirement for "cross endorsement" from incumbent licensees when appointing its "authorised representatives".

The primary legal issues before the court were whether ASIC's refusal to grant Strata an exemption from the cross-endorsement requirement under s 926A of the CorpAct was reasonable, and the implications of the existing regulatory framework concerning "authorised representatives" and "distributors" on Strata's business model. Specifically, the court considered the potential for joint and several liability of appointing licensees for the conduct of their representatives, and the distinction between the roles of an "authorised representative" and a "distributor" under ASIC instruments.

The court noted that while ASIC instruments from 2005 and 2015 made the concepts of "distributor" and "authorised representative" mutually exclusive, a person appointed as a "distributor" still retained the status of a "representative" of the appointing licensee. This meant that appointing licensees could be held liable for the conduct of their distributors, similar to their liability for authorised representatives. The court also considered that incumbent licensees, such as those within the Steadfast group, had refused to provide the necessary cross-endorsement for Strata's proposed authorised representatives, citing concerns about shared liability for a new business with no track record.

ASIC's refusal to grant the exemption was affirmed. The court found that Strata's proposed business model, which involved appointing "distributors" and seeking exemptions from cross-endorsement requirements, did not demonstrate that the exemption was necessary or that ASIC's decision was unreasonable in the circumstances.