FAE · ASIC Financial Adviser Exam
Lesson 1 of 2 in Licensing, registration and professional standards
When you need an AFS licence or an authorisation, what every licensee must do under s912A and s912B, how representatives are authorised and notified, when the licensee answers for a representative's conduct, and the banning and restricted-word rules that sit around them.
Financial advice regulatory and legal obligations9 min read8 sections
Checked against: Corporations Act 2001 (Cth), compilation No. 149 (19 Sep 2026): ss910A, 911A(1)-(2), 911B(1)-(3), 911C, 912A(1), (2), (5A), 912B, 916A-916F, 917A-917F, 920A(1)-(4), 920B, 920C, 920E(1), 921A, 921C(2), 923A, 923C; Corporations Regulations 2001, compilation No. 214 (1 Sep 2026): reg 7.6.02AAA; ASIC, Financial adviser exam: Exam preparation guidance v6.0 (Sept 2026), curriculum and reading list.. Independent prep, not endorsed by ASIC.
This lesson serves two learning outcomes in ASIC's curriculum for the regulatory and legal obligations area: demonstrate knowledge of legal requirements for both the individual and the licensee, and apply Chapter 7 of the Corporations Act to scenarios to identify obligations and breaches (Exam preparation guidance v6.0, Sept 2026).
The reading list names Part 7.6 Divisions 1, 3, 5, 6, 8 and 10, and ASIC says relevant statutory extracts are supplied with exam questions. You are not memorising section text; you are applying it.
Scenario questions in this area ask you to decide who holds the duty and who carries the loss: the licensee, the authorised representative, or both. Our practice questions drill authority gaps, multiple licensees, notices and restricted words.
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Answer each one before you tap to see the answer and why. All are from the practice bank.
Priya, 38, is an authorised representative of only one AFS licensee, Harbour Wealth, and her written authorisation covers superannuation and managed funds. Without telling Harbour Wealth, she recommends that Mr Lam, 67, invest A$90,000 in a portfolio of small-company shares, which her authorisation does not cover. She never tells him so. The shares fall 40%. As between Harbour Wealth and Mr Lam, Harbour Wealth is BEST described as…
Answer: B. responsible for Priya's conduct even though it was outside her authority
| Outside the licence, against a banning or disqualification order, or to someone who fails the s921C(2) standards |
| s916A(3) |
| Revocation | At any time, by written notice to the representative | s916A(4) |
| Sub-authorisation | Only an individual, only with the licensee's written consent; no further sub-authorising | s916B(3), (3A) |
| Two or more licensees | Each consents, or they are related bodies corporate; otherwise void | s916C(1), (2) |
| Licensee as representative | Not allowed, except under an insurer's binder | ss916D, 916E |
| Holding out | Offence to claim a licence, an authority or a principal you do not have | s911C |
Notices keep ASIC's records current. The person who authorises a representative lodges a notice within 30 business days (s916F(1)), and again within 30 business days of any change in the notified details or a revocation (s916F(3)). Where the licensee's consent to a sub-authorisation covered a class of individuals, the authoriser must tell the licensee within 15 business days (s916F(1A)).
Ruth is an authorised representative of Quokka Advice. She wants to advise for a second licensee, Marri Wealth, on life insurance as well. Quokka's managing director dislikes the plan and asks what the Act allows. Under Part 7.6 of the Corporations Act … (i) Quokka may revoke Ruth's authorisation at any time by written notice to her. (ii) Ruth may be an authorised representative of both licensees if each licensee consents.
Answer: A. (i) True, (ii) True
Answer: (i) True, (ii) True. Quokka can end Ruth's authorisation by written notice, and she can represent two licensees if each consents.(i) True. Section 916A(4) lets a licensee revoke an authorisation at any time by giving written notice to the representative, so Quokka's managing director has that power whatever Ruth plans.(ii) True. Section 916C(1)(a) permits a person to be an authorised representative of 2 or more licensees where each consents to her also representing the others; without those consents the second authorisation is void (s916C(2)), so Ruth's plan depends on both Quokka and Marri Wealth agreeing.Rule: A licensee may revoke an authorisation at any time by written notice, and an authorised representative may act for several licensees only with each licensee's consent (or in the other s916C(1) cases); where both consent, s917C allocates responsibility for her conduct between them.Source: Corporations Act 2001 (Cth) ss916A(4), 916C, 917C (compilation No. 149, 19 Sep 2026)
Case study FAE-C99, question 2 of 5: The new licensee's compliance plan. Two experienced advisers have left a large licensee to set up their own company, Fernleaf Advice Pty Ltd, in Geelong, and have applied to ASIC for an AFS licence. Neither has run a business before. Their application and draft compliance plan show: Licence sought: personal advice to retail clients on superannuation, managed investments and life risk insurance Directors: Mia Rossi, 44, relevant provider for 16 years · Raj Patel, 39, relevant provider for 11 years Advisers to be authorised: Mia, Raj and Tara Bell, 23, a provisional relevant provider who began her professional year at their old licensee, passed the exam in February and will be in quarter 3, supervised by Mia Expected clients in year one: about 350, all retail File reviews: 'when time permits' Complaints: handled 'informally by phone' External dispute resolution: 'join AFCA if a client ever complains' Professional indemnity insurance: quotes obtained; level of cover not decided, as premiums were higher than expected Compliance staff: none; Mia and Raj will share all compliance tasks on top of full client loads CPD year: to be decided after the licence is granted Capital: A$150,000 from the directors' savings; office lease in Geelong at A$48,000 a year The licensing officer then asks how Fernleaf will meet its compensation obligation, given that the directors have not settled their level of professional indemnity cover. What does the Act require of Fernleaf?
Answer: D. Arrangements to compensate retail clients, usually through PI insurance
Answer: Arrangements to compensate retail clients, usually through PI insurance. Section 912B requires a licensee that provides financial services to retail clients to have arrangements for compensating them for loss or damage from breaches of Chapter 7, and RG 126 says adequate professional indemnity insurance is the usual way to meet it.Why not the others:• A cash deposit lodged with ASIC, set by the number of advisers it authorises: there is no ASIC cash deposit scheme.• A capital reserve of at least A$150,000 held in a separate account: capital matters to ASIC's financial requirements, but a reserve does not replace the s912B arrangements.• No separate arrangements: AFCA pays awards to retail clients from its own fund: AFCA determinations bind the firm, which must pay them, and AFCA does not fund awards itself.Watch out: Fernleaf's undecided level of cover is therefore a gap it must close.Rule: Compensation arrangements must meet the regulations or be approved by ASIC in writing (s912B(2)).Source: Corporations Act 2001 (Cth) s912B (compilation No. 149, 19 Sep 2026); ASIC RG 126 Compensation and insurance arrangements for AFS licensees (issued 21 Nov 2024)
Case study FAE-C182, question 1 of 6: Quandong Wealth's rebrand. Quandong Wealth Pty Ltd is an AFS licensee in Perth with nine authorised representatives who give personal advice to retail clients on superannuation, managed investments and life risk insurance. It charges flat advice fees, but it receives life insurance commissions on risk policies, within the limits the Act permits, and does not rebate them to clients. Marcus Tan, 49, a relevant provider for 20 years, is one of Quandong's authorised representatives and supervises Jess Kaur, 27, a provisional relevant provider in quarter 3 of her professional year. Simone Hartley, 55, is employed by Quandong to advise only wholesale clients, high-net-worth investors who each give her a current qualified accountant's certificate. She is not a relevant provider and gives no advice to retail clients. Quandong's new marketing manager, Owen, wants a fresh brand for 2027. His plan includes a website banner reading 'Unbiased advice from Perth's financial advisers', business cards for Simone reading 'Simone Hartley, Financial Adviser, Private Clients', and deleting the paragraph in Quandong's website disclosure information that explains why Quandong is not independent. Marcus also wants SMSF advice added to his authorisation from 1 December, although he has never advised on SMSFs. Quandong's head of compliance, Leanne Ross, oversees all nine advisers alone and is behind on file reviews. Her latest review found that Marcus had approved Jess's last 12 SOAs in a single afternoon without reading the files. Standard 9 of the Code requires all advice to be 'neither misleading nor deceptive'. Leanne checks the banner's word 'Unbiased' against s923A of the Corporations Act. Given how Quandong is paid, the word…
Answer: C. may not be used, as Quandong keeps commissions it does not fully rebate
Answer: may not be used, as Quandong keeps commissions it does not fully rebate. 'Unbiased' is a restricted word under s923A(5), and s923A(2)(a)(i) excludes anyone receiving commissions, apart from commissions rebated in full to clients.Why not the others:• may be used, as s923A restricts only the word 'independent': s923A(5) also restricts 'impartial' and 'unbiased', and words of like import.• may be used, as commissions the Act permits do not count under s923A: that the commissions are allowed under the conflicted remuneration rules does not matter to s923A.• may be used if the website disclosure information sets out the commissions: disclosure does not cure it, as Quandong must instead publish that it is not independent, impartial or unbiased, with reasons (s942B(2)(fa)).Watch out: Standard 9 points the same way, since the banner would mislead clients.Rule: A business that uses a restricted word contravenes s923A(1) unless every condition in s923A(2) is met, and unrebated commissions alone rule out the exception.Source: Corporations Act 2001 (Cth) ss923A(1), (2), (5), 942B(2)(fa) (compilation No. 149, 19 Sep 2026); Financial Planners and Advisers Code of Ethics 2019 (F2019L00117), Standard 9
