Lately we have been busy advising licensees and authorised representatives (ARs) reviewing their compliance system and identifying gaps, particularly around fee-for-no-service issues and general remuneration structures.
These parties have had to pull their AR agreement out of the bottom drawer to examine its terms.
In this article, partner Selina Nutley takes a close look at the AR's obligation to provide assistance and documents to the licensee when a complaint is made by investors.
In most AR agreements, there is some obligation to comply with the licensee's reasonable business and compliance requirements and/or provide the licensee with all documents belonging to the AR. In some cases, the obligation to provide the documents might be limited to documents relating to advice provided.
When an investor makes a complaint about financial advice, the AR and the licensee work together to investigate, settle or defend the claim. Ultimately, however, the interests of the AR and the licensee will diverge. At this point we need to examine whether the licensee can use the information it received from the AR in an action against the AR claiming reimbursement.
There is no common interest privilege between an AR and its licensee when together they are resisting a claim brought by an investor. This means documents flowing between the two parties might be discoverable against each other when the licensee and the AR end up on opposing sides. Conversely, documents produced by the AR may not be covered by legal professional privilege between the licensee and its lawyer. An AR must be careful when producing documents and providing support to a licensee in these circumstances.
We can help licensees and ARs review AR agreements and provide assistance in any claim.