Closed APLs should meet independent test, says Sheehan

Speaking at IFA-CON in Sydney earlier this month, Ms Sheehan called for amendments to the definition of independence, saying it requires a different view of APLs.  

In announcing its position in June 2017 on whether advisers who do not meet the criteria in s923a of the Corporations Act can call themselves independently-owned, ASIC also stated that, in some cases, being subject to a non-open APL would mean being unable to use any of the relevant terms.

Ms Sheehan argues the independence test should focus less on whether APLs are open and easy to change, and more on how those APLs are put together.

“We are not owned by an institution, but yet with over 16,000 managed funds available in the Australian market today, my [professional indemnity] insurer is not happy about us having an open APL,” she said.

“So rather than focusing on the process for adding new products, ASIC should actually focus on the process by which the APL is actually formed, and the composition of the APL, to consider whether that APL is a restriction or not.”

Ms Sheehan believes the variety of products on an APL is a good indicator of independence.

“If an APL only had products issued by the CBA, then I can understand why it may not be appropriate for a licensee or financial planner to describe themselves as independent, as they probably have an association with the CBA,” she said. 

“However, if an APL has products issued by a number of separate issuers, this indicates the licensee is independent, provided obviously that they meet all the other tests as noted in section 923a.

“ASIC's focus on how easy it is to add products to the APL is too narrow and restrictive, and fails to take into account both the role APLs play in risk management tools and also in the professional indemnity insurance that we must hold.”