ASIC has reminded licensees of their reference checking obligations after recent breach reports indicate that people are being appointed without the required checks being completed.
The Australian Securities and Investments Commission (ASIC) has reminded the financial services industry of its reference checking duties after recent breach reports indicated that financial advisers, in particular, are being appointed without the required checks being completed.
ASIC’s reference checking and information sharing protocol is designed to improve the information available to licensees about the past conduct and performance of people seeking to work as financial advisers or mortgage brokers.
The framework began on 1 October 2021, with aggregators coming into the mix in 2024. Transition arrangements for the current protocol ended on 1 March 2025.
Under the regime, a recruiting licensee is one considering whether to employ or authorise a prospective representative, while a referee licensee is the individual’s current licensee or a former licensee from the previous five years from whom a reference is sought.
The protocol contains specific requirements for licensees to conduct reference checks and exchange information about prospective financial advisers and mortgage brokers.
This can include information relevant to an individual’s compliance history, conduct, complaints and performance, helping businesses make informed decisions before extending employment or authorisation.
However, ASIC has warned that recent breach reporting data indicates that AFS licensees, in particular, are appointing advisers without completing reference checks.
The corporate regulator said a recruiting licensee must seek information from an individual’s current or former licensees before employing or authorising them as a representative.
ASIC emphasised the mandatory nature of the requirement, stating: “an AFS licensee must take reasonable steps to obtain a reference from a referee licensee before they employ or authorise a prospective representative.”
Compliance focus sharpens
The regulator said disregarding the protocol could have significant consequences.
ASIC noted that failure to comply could attract a civil penalty, and added that it may also pursue administrative action, including suspending or cancelling a licence or adding conditions to it.
The regulator also urged licensees to look beyond the initial reference process when assessing new representatives.
It further said businesses should give particular attention to how they monitor and supervise authorised representatives moving from licensees with known compliance concerns.
[Related: How do aggregators track broker compliance?]
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