On 30 May 2025, the Full Court of the Federal Court of Australia handed down its appeal judgment in Australian Securities and Investments Commission v BPS Financial Pty Ltd.
This judgment may have broad implications for any person who has been appointed as an authorised representative by an Australian financial services licence (AFSL) holder and for any AFSL holder who has appointed an authorised representative. If this includes you, these arrangements should be reviewed promptly to ensure they are consistent with the principles in this judgment. The judgment is linked here.
Summary
On appeal, the Court concluded that to rely on the exemption from the obligation to hold an AFSL under section 911A(2)(a) of the Corporations Act (Authorised Representative Exemption), an authorised representative must act as a “representative” of the AFSL holder who appointed it.
To determine whether BPS Financial Pty Ltd (BPS) was exempt from the obligation to hold an AFSL by operation of the Authorised Representative Exemption for the relevant period, the Court considered whether BPS was acting "as a representative” of the AFSL holder or “on its own behalf”. The Court found the following key factors to be relevant to this question:
- BPS developed and issued the Qoin NCP Product without any involvement from the AFSL holder, PNI Financial Services Pty Ltd (PNI);
- BPS had engaged in “AFSL provisioning” whereby it had sought out AFSL holders so that it did not need to obtain an AFSL itself to issue the Qoin NCP Product and to provide general financial product advice about the Qoin NCP Product;
- the terms of the authorised representative agreement between PNI and BPS were reflective of BPS acting on its own behalf in issuing the Qoin NCP Product;
- BPS prepared and issued documents regarding the Qoin NCP Product prior to any dealings with PNI;
- the content of the documents focused on BPS’ primary role and only made bare references to BPS being an authorised representative; and
- the Terms of Use for the Qoin NCP Product did not refer to PNI or any other AFSL holder. The relevant contractual relationship was between BPS and relevant users.
The above factual matters were also considered in light of references in the PDS for the Qoin NCP Product stating that it was BPS (rather than the AFSL holder) who:
- charged fees and surcharges;
- collected, used and exchanged personal information from users;
- was entitled to vary the PDS at its reasonable discretion at any time;
- was entitled to exercise any right, remedy or power in any way it chose; and
- was entitled to assign or otherwise deal with its rights under the PDS without a user’s consent.
It was also not contemplated that any AFSL holder would be bound by, or required to perform any services under, the terms of the PDS.
These factors led the Court to conclude that BPS was not able to rely on the Authorised Representative Exemption as BPS was not acting "as a representative” of the AFSL holder who appointed it.
Background
In or about January 2020, BPS developed and made available to the public a system for making non-cash payments using a digital currency or crypto-asset which it named Qoin. BPS promoted Qoin tokens to retail consumers and business owners as a means of making payment for goods and services offered by those business owners. Up to 30 September 2022, the Qoin Wallet was issued more than 93,000 times and BPS received in excess of $40 million from the sale of Qoin Tokens.
In October 2022, ASIC commenced proceedings against BPS alleging that BPS unlawfully carried on a financial services business without holding an AFSL and that, in the course of that business, it made false and misleading representations in connection with the supply or use of a financial product, being the Qoin NCP Product.
It was accepted by both parties that the Qoin NCP Product fell within the definition of ‘financial product’ and that it was a non-cash payment facility.
Whilst the Federal Court held that BPS contravened the Corporations Act by:
- carrying on a financial services business in issuing a financial product, and providing financial product advice in relation to that product, in circumstances where BPS did not hold an AFSL; and
- engaging in misleading and deceptive conduct (this finding was not considered on appeal),
the Federal Court held that BPS did not contravene the obligation to hold an AFSL for the 10 month period (CAR Period) during which it was appointed as authorised representative of PNI as it was exempt by operation of the Authorised Representative Exemption.
ASIC appealed the Federal Court’s decision on the basis that the primary judge erred by finding that during the CAR Period, BPS was acting as a representative of PNI, without having made findings of fact as to whether or not in providing the relevant financial services, BPS was acting on its own behalf or was acting as representative of PNI.
Outcome of the Appeal
On appeal, the Full Federal Court held that BPS contravened section 911A(1) of the Corporations Act by carrying on a financial services business without holding an AFSL because BPS was not acting “as a representative” of PNI during the CAR Period, and therefore BPS could not rely on the Authorised Representative Exemption. The Court had reference to the factual matters set out in the “Summary” above in reaching this decision.
A key takeaway from the judgment is that the Authorised Representative Exemption is only available to a person who provides a financial service (the authorised representative) where the financial service is provided "as representative of" an AFSL holder. This requires the person who seeks to rely on the exemption to satisfy the definition of “representative” which identifies the full ambit of persons who can claim the exemption, as well as requiring the person to be acting in a “representative capacity”. It follows that if a representative provides a service on their own behalf and not "as a representative" of an AFSL holder, the representative cannot rely on the exemption. Determining whether or not an authorised representative is acting “as representative of” an AFSL holder is a factual question.
The Full Court of the Federal Court stated that for the purposes of this appeal, it was not necessary to decide whether an authorised representative of an AFSL holder can be the issuer of the relevant financial product.
Although the Court made no finding as to whether it is possible to rely on an authorised representative arrangement to “issue” a financial product, the clear implication from the judgment is that there are likely few circumstances where that will be possible.
Similarly, the decision is expected to result in a review of trustees providing financial services under an authorised representative arrangement.
All existing and proposed authorised representative arrangements should be considered in light of this judgment.
