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Dealing and providing custodial or depository service as secondary service

This is Information Sheet 141 (INFO 141). It is for Australian financial services (AFS) licensees and their representatives who deal in financial products and provide custodial or depository services as a secondary service.

A secondary service is a financial service provided to a retail client via an intermediary. You are a secondary service provider if you provide a financial service via an intermediary.

Note: In this information sheet, all section references are to the Corporations Act 2001 (Corporations Act), unless otherwise specified.

This information sheet explains:

Requirements that apply to secondary service providers

If you are a secondary service provider, you may need to, among other things:

  • have an appropriate retail AFS licence authorisation for the financial service
  • have a compliant dispute resolution system and be a member of the Australian Financial Complaints Authority (AFCA) (see section 912A(1)(g), (2) and (2A), Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) and Regulatory Guide 271 Internal Dispute Resolution (RG 271))
  • provide an FSG about the financial service to the retail client (see Divisions 2 and 2A of Part 7.7 of the Corporations Act and Information Sheet 291 FAQs: FSGs and website disclosure information (INFO 291))
  • meet training and registration requirements if personal advice is provided (see Professional standards for financial advisers on the ASIC website and Information Sheet 276 FAQs: Registration for relevant providers (INFO 276))
  • satisfy general advice warning requirements if general advice is provided (see section 949A), and
  • have in place arrangements for compensating clients for loss or damage suffered because of a breach of an obligation in Chapter 7 of the Corporations Act – for example, professional indemnity insurance (see section 912B and Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126)).

When secondary services are provided

Dealing in a financial product as a secondary service

A secondary service can be provided when an AFS licensee or authorised representative deals in a financial product by:

  • issuing a financial product to a retail client via an intermediary, or
  • applying for, acquiring, varying or disposing of a financial product on behalf of a retail client via an intermediary: see section 766C.

If you are dealing in a financial product because you issue it to a retail client via an intermediary, the person acquiring the financial product is your client.

If you deal in a financial product by applying for, acquiring, varying or disposing of it on behalf of a retail client via an intermediary, the retail client will be your client. As this is a secondary service, you must meet the requirements in the Corporations Act that apply when financial services are provided to retail clients.

Similarly, if the intermediary is an agent for a retail client, the retail client will be your client. You will provide a financial service to that retail client as a secondary service provider.

You do not need to treat the retail client of the intermediary as your client if the intermediary is the agent for the retail client, but contracts with the client in terms that imply that they are the principal. In that case, the intermediary can ordinarily be treated as the principal without inquiring further.

Also, you do not need to treat the retail client of the intermediary as your client if the intermediary acts as principal. For example, if the transaction is executed in the name of a trustee or custodian, they will be your client and your obligations will be to the trustee or custodian. The nature of those obligations will depend on whether the trustee or custodian is a wholesale or retail client. 

Providing a custodial or depository service as a secondary service

A secondary service can be provided when an AFS licensee or authorised representative holds financial products on trust for a retail client of an intermediary (instead of on trust for the intermediary) under an arrangement with that intermediary who has an arrangement with the retail client. In this case, the AFS licensee or authorised representative, as the holder of the products, will be providing a custodial or depository service to the retail client: see section 766E.

If you as the secondary service provider are the holder of the financial products, you must satisfy the retail client requirements of the law, subject to any other exceptions in the law that may apply.

However, if you hold financial products on trust for the intermediary (instead of on trust for their retail client), as the holder, you will be providing a custodial or depository service to the intermediary, and not to their retail client. This arrangement is not a secondary service. 

The requirement for secondary service providers to provide an FSG

An AFS licensee or authorised representative (providing entity) who provides a financial service to a retail client must generally provide that client with an FSG before providing the service: see sections 941A, 941B and 941D(1).

We recognise that there may be practical difficulties in providing an FSG in cases where the providing entity does not have a direct relationship with the retail client. If you are a secondary service provider, there are a number of ways you may be able to overcome this practical difficulty, including by:

  • making website disclosure information available if the financial service is financial product advice or dealing in a financial product for the purpose of implementing financial product advice (see Division 2A of Part 7.7 of the Corporations Act and section 6 of ASIC Corporations (Financial Services Guides) Instrument 2025/541)
  • arranging for the intermediary to give your FSG to the retail client. In this case, the intermediary would be acting on your behalf. You must structure your arrangements to ensure that the intermediary actually provides the FSG to the retail client in a way that satisfies your legal obligations. If the FSG is not provided, you will have breached the law unless you are under a mistake of fact (see section 952C of the Corporations Act and sections 6.1 and 9.2 of the Criminal Code)
  • entering into a written agreement with the intermediary under which the intermediary agrees to give your FSG to the retail client or inform the retail client how to obtain your FSG (see regulation 7.7.02(7) of the Corporations Regulations 2001)
  • structuring your relationship with the intermediary in such a way that you avoid providing a secondary service to the retail client
  • including requirements in your agreement with the intermediary for the intermediary to provide you with the retail client’s address details – you could then provide the FSG to that client
  • preparing a combined FSG with the intermediary incorporating information about the financial service that you both provide to the retail client. However, you remain responsible for ensuring that the FSG is actually provided to the retail client in a way that satisfies your legal obligations, or
  • relying on our relief in section 5 of ASIC Instrument 2015/541.

While section 940B exempts a person providing financial services to retail clients from having to provide an FSG where there is ‘no reasonable opportunity’, this exemption only applies to secondary services in rare cases: see, for example, Example 4 in INFO 291. This is because a secondary service provider could obtain the contact details of the retail client from the intermediary.

For more information about obligations relating to FSGs, see INFO 291.

Relief to provide an FSG in the Product Disclosure Statement

Under ASIC Instrument 2015/541, a person arranging for the issue of a financial product by a product provider under an ‘intermediary authorisation’ (as defined in section 911A(2)(b)) may include an FSG in that product provider’s Product Disclosure Statement (PDS) if the following conditions are met:

  • the FSG forms a separate and clearly identifiable part of the PDS
  • the PDS includes the phrase ‘Financial Services Guide’ at or near the start of the section that is the FSG, and
  • the FSG prominently discloses:
    • the names of the intermediary and the product provider, and the nature of their relationship, and
    • if the intermediary is the representative of an AFS licensee, the name of that licensee and nature of its relationship with the product provider: see section 5(3) of ASIC Instrument 2015/541.

ASIC Instrument 2015/541 also provides relief that allows the author of an ‘expert report’ to include its FSG as a separate and clearly identifiable part of the report if it is to be included in a third party’s disclosure document (e.g. a prospectus or PDS). There are conditions that must be met to qualify for this relief that are equivalent to the conditions above: see section 5(2) of ASIC Instrument 2015/541.

Intermediary obligations

Intermediaries who provide a secondary service to a retail client should consider whether they are also providing other financial services to the client and meet Corporations Act requirements that apply when those financial services are provided to retail clients.

In addition, because the intermediary bundles the additional financial service with the secondary service provider’s financial service, we would expect that, in meeting its obligations under the law and its AFS licence (if applicable), the intermediary would explain to the retail client what services are being provided, who is responsible for each service and how the client could contact the responsible service provider if the client has any questions or complaints. 

Where can I get more information?

For more information, see:

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.

Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance.

This information sheet was updated in November 2024.

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Last updated: 21/11/2024 02:04