How Legal are your Corporate Authorised Representative / Authorised Representative Agreements? Take the Quiz

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Tim Dixon Special Counsel Linkedin

In October 2016, we published a brief article entitled “Is your Standard Form Contract bullet proof?”.  That article was prepared immediately prior to the changes to the Unfair Contracts regime contained within the Australian Consumer Law which came into effect on 12 November 2016.

Since then we have reviewed a substantial number of Corporate Authorised Representative (CAR) Agreements and Authorised Representative (AR) Agreement which are currently in use by Financial Services Licensees.  Very often, the director of the CAR is an AR of the licensee and the terms of the AR Agreement mirror the terms of the CAR Agreement.

From what we’ve seen, a great many contain terms which are, in our view, likely to be held by a Court or Tribunal to be unenforceable and likely to be struck out of the CAR and AR Agreements if challenged.

Unfair terms may include:

  • terms which allow you to limit or avoid your obligations but do not make the same provision for the other party;
  • terms which allow you to terminate the contract but do not make the same provision for the other party;
  • terms which allow you to vary the contract but do not make the same provision for the other party; or
  • terms which unreasonably penalise the other party for breach or termination of the contract.

How do your CAR/AR Agreements RATE?

Take the quiz and find out:

Is it a small business contract?

  1. Was the contract entered into before 12 November 2016 and has not been varied or amended since?
  2. Does the CAR employ less than 20 people?

(if yes to 1 or 2 – go no further because your contract isn’t covered by the Unfair Contracts provisions).

Is it a Standard Form contract?

  1. Do you use the same contract for all ARs and CARs?
  2. When you take on a new AR and/or CAR, do you present them with a pre-prepared contract on a take it or leave it basis?
  3. Does the AR and/or director of the CAR really have the opportunity to read, consider and take advice on the contents of the agreements before signing?
  4. Would you amend or delete any of the terms if it was requested?

How “fair” is it?

  1. Does it have a number of “events of default” which can result in termination or suspension of the CAR/AR without any opportunity to make good the default?
  2. Does it have terms whereby the Licensee can decide in its “sole and absolute discretion” upon a course of action which is detrimental to the CAR/AR?
  3. Does it have very broad indemnification provisions in favour of the Licensee but few or none in favour of the CAR/AR?
  4. Does it enable the Licensee to withhold payment of commissions and fees indefinitely?
  5. Does it have a provision for the Licensee to unilaterally amend the contract?
  6. Does it have an “entire agreement” clause?
  7. Would you sign it?

Did you pass?

If you answered “yes” to more than a couple of questions from 1-12, your CAR/AR agreement– or at least parts of it – may well be unenforceable if challenged.  Where the offending clauses have been relied upon or exercised by the Licensee to the detriment of the CAR/AR, damages might be awarded in addition to the clauses being struck out of the agreement.


It is worth noting that whilst the Australian Competition and Consumer Commission (ACCC) has general oversight of the Unfair Contract provisions of the Australian Consumer Law, ASIC has responsibility for unfair contract terms relating to the provision of financial products and services.  Primarily that role will relate to the provision of financial services to small businesses.  Whilst it is unclear whether ASIC will descend into the relationships between licensees and their representatives, it may at some point consider that a licensee which enters into manifestly unfair CAR/AR contracts is not “providing financial services efficiently, honestly and fairly”.

When the time comes for the licensee to rely on the CAR/AR agreement, it may be because the representative has, by its actions, placed the AFS license in some potential jeopardy.  In such circumstances an unenforceable agreement will be potentially worthless.  In some circumstances a breach report will have been made and ASIC scrutiny attracted.  That is when the licensee must be able to take quick, decisive and effective action to protect its business and the licence without being concerned about the CAR/AR agreement being dismembered in a court at your expense.

Unsure… or worried?  We can help

Holley Nethercote Lawyers can review and revise your documents as necessary.  We also have template documents available in the HN Hub: an online compliance portal that helps compliance managers and officers, including responsible managers, keep on top of their regulatory obligations and training, which can be utilised or personalised as required.

Please contact the author of this article,  Tim Dixon, Special Counsel or Naomi Fink, Senior Associate to discuss your requirements or visit the HN Hub.

Use the code ‘25UCTCL‘ to receive a 25% discount on our Informational Sheet covering the topic of Unfair Contract Terms for ACL, AFSL and Wholesale.

Author: Tim Dixon (Special Counsel)

This article was published as in opinion piece in the Independent Financial Adviser (IFA) on 31 August 2020.

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