Time to review your referrer arrangements

You may have missed this article published by Dentons about action ASIC is taking in relation to unlicensed introducers.

The proceedings are a timely reminder that licensees should regularly review their arrangements with referrers to ensure compliance with the law (both the agreements and what happens in practice)

1. Unlicensed referrers

When it comes to referral arrangements with unlicensed referrers, it is crucial not only that referral agreements comply with the law, but also that what happens in practice complies. Licensees should conduct regular audits of the process unlicensed referrers are following and the information they are providing. Dentons also recommends at least yearly communications with unlicensed referrers to remind them of what they can and cannot do.

Many licensees structure their referral arrangements to comply with the reg 25(5) exemption. Under this exemption, an unlicensed referrer passes on customers’ details to the licensee when such referral is incidental to the referrer’s business.

Dentons have set out some of the key requirements for complying with the reg 25(5) exemption below as a reminder.

a) Referral registers

Reg 9AB(2) requires the licensee to maintain a register of all of the referral agreements it has in place. The register must contain:

• the referrer’s name and contact details;
• the date and means by which the referrer was advised in writing of the way in which the referrer may engage in credit activities under the agreement; and
• the day on which the referrer first gave to the licensee a consumer‘s name and contact details pursuant to the agreement.

Under reg 9AB(4), the licensee must make the register available to ASIC on request.

b) Licensee disclosures

Reg 9AB(5) requires a licensee to contact the referred consumer within 10 business days of receiving the referral.

Licensees should document a standard script that is used when contacting a consumer by phone. There are certain disclosures that must be made under the NCCP Regulations.

If the customer is contacted by letter or email, the letter or email must disclose the name of the referrer and state:

• that the licensee is contacting the consumer as a result of being provided with their contact details by the referrer; and
• the referrer may receive a financial benefit or payment.

Under reg 9AB(6), the licensee is required to identify itself and begin the discussion with the referred consumer with words to the following effect:

• I am contacting you because we have been provided with your contact details by [name of referrer]. Can you confirm that you agreed with [name of referrer] to have us contact you?
• (When a payment of commission may be given to the referrer) Before we continue, I would like to let you know that if you take up any of our products or services, [name of referrer] may receive the following financial benefits: [insert brief description]. Are you happy to continue this discussion?

The MFAA is pleased to make available a practical compliance guide as well as templates to help members ensure that their referral arrangements comply with the law. This guide is titled ‘Referrer Exemptions’, was developed in collaboration with law firm Dentons and is available in the Compliance Resources section of the MFAA Learning Hub. Note – your MFAA member number will be required to access the materials. If you require further compliance support, please do not hesitate to contact our friendly Compliance team on ua.moc.aafm@ecnailpmoc.