Explanatory Statement
ASIC Corporations (Adara Advisors) Instrument 2022/625
This is the Explanatory Statement for ASIC Corporations (Adara Advisors) Instrument 2022/625.
The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).
Summary
1. The ASIC Corporations (Adara Advisors) Instrument 2022/625 (this instrument) exempts individuals (Volunteers) engaged in the financial services industry as representatives of Adara Advisors Pty. Ltd ACN 119 655 499 (Adara Advisors) from needing to be appointed as authorised representatives of both Adara Advisors and another licensee (Volunteer Firm), as would otherwise be required by subsection 911B(1) of the Corporations Act 2001 (the Act). The instrument permits Volunteers to provide ‘support’ tasks (work) which may constitute financial product advice to Panel Members (to whom ASIC Corporations (Adara Advisors) Instrument 2015/628 applies) and to Adara Partners (Australia) Pty. Limited ACN 601 898 006 (Adara Partners) only.
Purpose of the instrument
Background
2. Adara Advisors, an Australian financial services licensee (licensee), has a business which relies on prominent members (Panel Members) of the financial services industry to work on corporate advisory matters on a pro bono basis for Adara Partners. Adara Partners is an authorised representative of Adara Advisors. The fees generated from services rendered to wholesale clients of Adara Partners are donated to an international development organisation.
ASIC Corporations (Adara Advisors) Instrument 2015/628
3. In 2015, ASIC granted Adara Advisers relief from the regulatory burden of compliance with subsection 911B(1) of the Act through ASIC Corporations (Adara Advisors) Instrument 2015/628. By granting the relief, Adara Advisors was able to appoint Panel Members as authorised representatives to provide financial services to wholesale clients of Adara Partners, without also needing to be appointed as authorised representatives of another licensee on whose behalf the Panel Member, as an employee or director, provides financial services.
4. Prior to the legislative relief being granted, ASIC granted individual relief to Adara Advisors on a conditional basis to nine individual Panel Members through ASIC Instrument 15/0474, which was executed on 29 May 2015. The individual relief was granted as a temporary measure to facilitate the launch date of Adara Partners.
ASIC Corporations (Adara Advisors) Instrument 2022/625
5. Adara Advisors applied for relief from ASIC, requesting that ASIC exercise its powers under paragraph 926A(2)(a) of the Act to exempt Volunteers engaged in the financial services industry, as representatives of Adara Advisors, from needing to be appointed as authorised representatives of both Adara Advisors and the Volunteer Firm, in order to provide work to Panel Members and Adara Partners which may constitute financial product advice.
6. The purpose of this instrument is to relieve Adara Advisors, Volunteers and Volunteer Firms from the operation of subsection 911B(1) of the Act in circumstances where the Volunteer’s work on behalf of Adara Advisors may, in a technical sense, constitute the provision of financial product advice to Panel Members and/or Adara Partners. Unlike the operation of ASIC Corporations (Adara Advisors) Instrument 2015/628, the exemption under this instrument will not permit Volunteers to provide financial product advice to clients of Adara Partners.
Consultation
7. ASIC consulted with Adara and its legal representatives about the effect of the exemption on its financial services business. ASIC believes this instrument does not have a regulatory impact apart from the discrete class of persons to which it applies. Relief of this kind normally would not necessitate the issue of a legislative instrument.
Operation of the instrument
8. Under paragraph 911B(1)(a), Volunteers may, in the course of their regular occupation, qualify as providers of financial services on behalf of a licensee (or a person who is otherwise exempt from having to hold an Australian financial services licence under subsection 911A(2)), in the capacity of an employee of the licensee or a related body corporate of the licensee. Should the Volunteer engage in work for Panel Members or Adara Partners that constitutes the provision of financial services on behalf of Adara Advisors, subparagraph 911B(1)(b)(iv) would require that the Volunteer be appointed as an authorised representative of both Adara Advisors and their respective Volunteer Firm. Adara Advisors sought relief from this requirement.
9. This instrument grants an exemption to Volunteers so they can assist Panel Members and Adara Partners to provide financial services on behalf of Adara Advisors without being an authorised representative of Adara Advisor or the Volunteer Firm as would otherwise be required under subsection 911B(1) of the Act, by performing ‘support’ tasks for Panel Members and/or Adara Partners that may constitute financial product advice, such as:
(a) research into relevant sectors, companies or economic matters relevant to a client mandate;
(b) preparing briefing notes for Panel Members and/or Adara Partners on companies and market sectors;
(c) preparing draft pitch books and draft reports for Panel Members and/or Adara Partners to review, finalise and present to clients;
(d) preparing financial analyses of market movements and share prices;
(e) reviewing documents relating to the client engagement (such as offering documents, financial models and ASX announcements) and preparing summaries for review by Panel Members and/or Adara Partners;
(f) acting on the instruction of the Adara Partners CEO, Adara Partners Corporate Advisory Director and/or Panel Members to provide such back up information and support as they require to be fully informed for the purposes of advising the client;
(g) accompanying Panel Members and/or Adara Partners to attend meetings with clients; and
(h) corresponding with clients (e.g. by email and/or calls) as directed by Panel Members and/or Adara Partners for administrative purposes, such as scheduling meetings, passing on material and requesting information from clients.
10. The exemption under this instrument applies where:
(a) Adara Advisors holds an Australian financial services licence covering the provision of the financial product advice; and
(b) the Volunteer is a representative of Adara Advisors; and
(c) the Volunteer is a representative of another person (Volunteer Firm) who carries on a financial services business and the Volunteer is an employee of the Volunteer Firm or a related body corporate of the Volunteer Firm; and
(d) the Volunteer only provides the financial product advice to Panel Members or to Adara Partners to support Panel Members and Adara Partners to provide financial services to wholesale clients of Adara Partners; and
(e) the Volunteer does not provide financial product advice to clients of Adara Partners; and
(f) Adara Partners is an authorised representative of Adara Advisors; and
(g) Adara Advisors keeps a register of Volunteers that it engages; and
(h) Adara Advisors has received from the Volunteer written confirmation that the Volunteer has received the consent of the Volunteer Firm to the Volunteer being engaged by Adara Advisors as its representative; and
(i) Adara Advisors has a written undertaking from the Volunteer:
(i) to manage conflicts of interest arising from acting as a representative of Adara Advisors and a representative of the Volunteer Firm; and
(ii) not to use confidential information obtained in the course of acting as a representative of Adara Advisors when acting as a representative of the Volunteer Firm; and
(iii) not to use confidential information obtained in the course of acting as a representative of the Volunteer Firm when acting as a representative of Adara Advisors; and
(iv) to satisfy the training requirements of the Volunteer Firm in relation to conflicts management, confidential information, and any other relevant training; and
(v) not to receive any financial benefit as a result of providing the financial product advice; and
(j) Adara Advisors has received from the Volunteer a written notification that the Volunteer Firm has confirmed that there is no conflict of interest for the Volunteer Firm in the Volunteer providing the financial product advice; and
(k) the Volunteer does not receive any financial benefit as a result of the Volunteer providing the financial product advice.
11. This instrument commences on the day after it is registered on the Federal Register of Legislation.
Legislative instrument and primary legislation
12. This instrument only affects a discrete class of persons to which it applies; namely, Volunteers, Adara Advisors and Volunteer Firms. This instrument provides administrative relief in circumstances where the regulatory benefit in requiring strict compliance with the primary legislation is not proportional to the commercial burden. On this basis, it is appropriate for ASIC to provide relief through its exemption powers, as the matters contained in this particular instrument are of a highly specific nature which are more appropriate for legislative instrument rather than primary legislation.
Duration
13. This instrument will cease to apply on 1 October 2025, in line with the date that ASIC Corporations (Adara Advisors) Instrument 2015/628 is due to sunset on.
Legislative authority
14. This instrument is made under paragraph 926A(2)(a) of the Act.
15. Subsection 926A(4) of the Act provides that an exemption that is expressed to apply in relation to a class of persons is a legislative instrument. This means that this instrument is subject to disallowance in accordance with section 42 of the Legislation Act 2003. Section 44 of the Legislation Act 2003 does not apply to this instrument. The instrument is subject to disallowance.
Statement of Compatibility with Human Rights
16. The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.
Attachment
Statement of Compatibility with Human Rights
This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
ASIC Corporations (Adara Advisors) 2022/625
Overview
1. The ASIC Corporations (Adara Advisors) Instrument 2022/625 (this instrument) exempts individuals (Volunteers) engaged in the financial services industry as representatives of Adara Advisors Pty. Ltd ACN 119 655 499 (Adara Advisors) from needing to be appointed as authorised representatives of both Adara Advisors and another licensee (Volunteer Firm), as would otherwise be required by subsection 911B(1) of the Corporations Act 2001 (the Act). The instrument permits Volunteers to provide ‘support’ tasks (work) which may constitute financial product advice to Panel Members (to whom ASIC Corporations (Adara Advisors) Instrument 2015/628 applies) and to Adara Partners (Australia) Pty. Limited ACN 601 898 006 (Adara Partners) only.
Assessment of human rights implications
2. This instrument does not engage any of the applicable rights or freedoms.
Conclusion
3. This instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.