Australia - Referring investor visa clients to managed fund products
The Australian Securities and Investments Commission (ASIC) has advised the Department of Home Affairs that it holds concerns arising from Significant Investor Visa (SIV) applicants being referred to particular managed fund products when being provided with immigration assistance.
In particular, ASIC is concerned that some conduct involved in these referrals may have contravened the financial services provisions of the Corporations Act 2001 (the Act). ASIC is concerned that, where a registered migration agent (RMA) or Australian legal practitioner refers a SIV applicant to a managed fund product, the referral might involve the RMA or Australian legal practitioner providing financial product advice.
Giving a recommendation or a statement of opinion, or a report of either of those things, constitutes financial product advice under section 766B of the Act, if it is intended to influence a person or persons in making a decision about a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products, or could reasonably be regarded as being intended to have such an influence.
Unless an exemption applies, a person cannot provide financial product advice unless the person holds an Australian Financial Services (AFS) licence that authorises them to provide financial product advice. Referring a client to a person for the purposes of the person providing the client with financial product advice is itself providing financial product advice.
Permitted exceptions are set out in Regulation 7.6.01(1)(e) of the Corporations Regulations 2001 (the Regulations). ASIC advises that RMAs and Australian legal practitioners who refer a client to a financial adviser for the provision of a financial service may be exempt under Regulation 7.6.01(1)(e) of the Regulations from the requirement to hold an AFS licence. In order to rely on this exemption, you must:
only refer SIV applicants to the fund manager and that referral consists only of:
informing the client that the fund manager, who must be an AFS licence holder, is able to provide a particular financial service; and
giving the client information about how to contact the fund manager
avoid representations regarding the quality of the services the fund manager can provide
disclose any benefits/commissions that the immigration advisor receives directly or indirectly from the fund manager for making the referral.
SIV applicants have been victims of serious financial fraud in Australia. ASIC recommends that a registered migration agent (RMA) or Australian legal practitioner encourage SIV applicants to seek independent financial advice and, as far as possible, that the immigration advisor refer SIV applicants only to fund managers with robust risk and governance frameworks.
ASIC will continue to monitor compliance in this area and will take regulatory action where appropriate. Individuals who give unlicensed financial advice commit a criminal offence and can be subjected to a maximum of five years imprisonment and/or a fine of up to AUD$133,200 (600 penalty units). For corporations the penalties are up to AUD$1.33 million (6,000 penalty units). There are also civil penalties for carrying on an unlicensed financial services business: up to the greater of AUD$1.11 million (5,000 penalty units) or three times the benefit obtained and detriment avoided for an individual; or the greater of AUD$11.1 million (50,000 penalty units), three times the benefit obtained or detriment avoided, or 10% of annual turnover (capped at 2.5 million penalty units) for a body corporate.