Disclosure of Lack of Independence & using the terms ‘independent’, ‘independently owned’ and ‘non-aligned’

s923A of the Corporations Act prohibits a person from using certain restricted words and expressions in a financial services business or in the provision of a financial service unless the person (including anyone providing a financial service on their behalf or anyone on whose behalf they are providing a financial service) does not receive:

• commissions (apart from commissions that are rebated in full to the client)
• forms of remuneration calculated on the basis of the volume of business placed by the person with an issuer of a financial product; or
• other gifts or benefits from product issuers which may reasonably be expected to influence that person
• the person operates free from direct or indirect restrictions relating to the financial  products in respect of which they provide financial services; and
• the person is free from conflicts of interest that might arise from any relationships with product issuers and which might reasonably be expected to influence the person.

Financial service providers who receive asset-based fees are not prevented from using restricted terms such as ‘independent’ merely because of their receipt of asset-based fees.

ASIC has stated in its that asset-based fees

• are not captured by s923A
• are not considered to be forms of remuneration on the basis of the volume of business

Yes, depending on the process in place for allowing you to recommend a product that is not on the APL.

ASIC’s view in is that imposing an APL on a financial service provider could constitute a direct or indirect restriction, thereby prohibiting a restricted term under s923A from being used.

This will depend on the operation and breadth of the APL:

• Where the APL is used as an open list of products, or where there is an easy process to recommend a product that is not on the APL, the restriction is less likely to prevent a financial services provider from calling themselves independent (assuming all the other conditions of s923A are met).
• Where the off-APL process is not easy to access, it is more likely to be considered a restriction, and as such, the financial service provider would not be permitted to use a restricted term.

You are not permitted to use the terms ‘independently owned’, ‘non-aligned’, or ‘non-institutionally owned’ unless you meet all the requirements in s923A.

• ASIC Media Release 17-206 ASIC clarifies its position on the use of ‘independently owned’ under s923A
• ASIC Corporations (Disclosure of Lack of Independence) Instrument 2021/125) and Explanatory Statement
• ASIC Example lack of independence disclosure statement (attachment to RG175)
• ASIC Regulatory Guide 175 Licensing: Financial product advisers—Conduct and disclosure (RG 175) (Section C)