Full Federal Court decision in BPS Financial litigation – More questions than answers for AFS licensees and authorised representatives?

In the latest development in ASIC’s litigation against digital asset business BPS Financial Ltd (BPS), on 30 May 2025 the Full Federal Court has allowed ASIC’s appeal against the primary judge’s decision that BPS was entitled to rely on the widely utilised ‘authorised representative’ exemption (AR Exemption) in section 911A(2)(a)(i) of the Corporations Act for the purposes of issuing a non-cash payment facility financial product.

While many had hoped that this latest decision would put to rest certain historical uncertainties around the scope of the AR Exemption, the decision instead creates more questions than answers for authorised representatives and AFS licensees, which we explore in this article.

Recap of BPS Financial litigation

• ASIC has historically interpreted, and argued in the primary decision, the AR Exemption provisions to require an authorised representative to be acting under an agency relationship with the relevant AFS licensee, particularly in the context of unregistered managed investment schemes (see INFO 251), with the result that the AR Exemption cannot cover financial services that can conceptually only be provided as principal – such as issuing financial products;
• the primary judge applied a less restrictive interpretation to the statutory provisions, that did not require or infer a principal/agent relationship between an AFS licensee and its authorised representative, deciding that an authorised representative could rely on the AR Exemption to perform any financial services authorised by the authorising AFS licensee, provided those services were covered by the AFS licensee’s licence; and
• ASIC quickly appealed this aspect of the primary judge’s decision and has publicly retained its historical position in INFO 251, leaving AFS licensees and both existing and prospective authorised representatives unsure whether to conservatively apply ASIC’s commercially restrictive interpretation, or otherwise rely on the primary decision going forward.

Decision

While the decision held that BPS was not entitled to rely on the AR Exemption, the Court ultimately considered that:

• a factual assessment of BPS’ conduct demonstrated that although it had been authorised by the relevant AFS licensee to provide the relevant financial services as its representative, BPS had in fact been dealing in its own right and not on behalf of the licensee in a ‘representative’ capacity when it actually provided the services; and
• it was therefore not necessary to substantively engage with the primary judge’s interpretation of the scope of the AR Exemption. In particular, the Court considered it did not need to decide:
  • whether an authorised representative can be an issuer of financial products; or
  • whether a person who issues a financial product can never act in their capacity as an authorised representative of an AFS licensee, or whether an AFS licensee needs to be involved in some way in the issuing of the relevant financial product.

Relevantly for any financial service provider that currently relies on the AR Exemption, the Court placed significant emphasis on the fact that although the drafting of the Terms of Use, product disclosure statement and financial services guide for the financial product all recognised BPS’ status as an authorised representative of the AFS licensee, it was clear from the evidence that the AFS licensee had little to do with the issue of the financial product and had merely been enabling “AFSL provisioning”, being the practice whereby the issuer of a financial product seeks out an AFS licensee to avoid the need to obtain an AFSL for itself. In particular, the AFS licensee had no material involvement in the development of the financial product or any of the associated documentation. The documents demonstrated that BPS issued in its own right, and the financial services provided by BPS had no connection with the financial services provided by the licensee.

Implications for AFS licensees and authorised representatives

The decision raises further questions regarding the actual legal scope of the AR Exemption, as well as significant commercial and practical implications for implementing such arrangements. While the decision suggests that the AR Exemption requires the AFS licensee to have some level of involvement in the financial services provided by authorised representatives on its behalf beyond simply enabling AFSL provisioning and periodic regulatory compliance reviews to satisfy their obligation to ensure their representatives comply with financial services laws under s 912A(1)(ca), and to be more fulsomely referred to in relevant commercial and disclosure documentation, the decision:

• raises new uncertainties around the level of practical involvement an AFS licensee actually needs to have in relation to all financial services provided by an authorised representative in the absence of a clear principal/agent or employer/employee relationship, noting that the decision did not explicitly overturn the primary judge’s interpretation that the AR Exemption did not require the existence of such a relationship and otherwise did not establish a clear-cut or definite set of indicia for conducting this exercise;
• did not consider the availability of the alternative intermediary authorisation exemption (IA Exemption) in s 911A(2)(b) to be able to issue a financial product without an AFSL. However, as the primary decision made clear, care is required where the IA Exemption is used in combination with the AR Exemption. The primary decision considered that a product provider cannot act as intermediary, i.e. make offers to arrange the issue of a financial product, in its capacity as authorised representative and issue the financial product, in its own capacity. The words “arrangement” and “intermediary” connotes at least two parties being involved, such that the product provider must be a separate person from the person making the offers. However, the two exemptions can otherwise be utilised in combination (and either documented separately, in an intermediary authorisation agreement, or a corporate authorised representative and intermediary authorisation agreement or “CARIAA”), provided the AR Exemption is relied on for financial services other than arranging for itself to issue, or, until the continued uncertainly discussed in this article is resolved, dealing by issuing “as authorised representative”. However, payment providers who provide stored value facilities, payment facilitation services and cross-border transfer services should be aware of Treasury’s current proposal to restrict reliance on the IA Exemption for these services; and
• serves as a reminder that AFS licensees remain statutory lunder Division 6 of Part 7.6 of the Corporations Act to third-party clients for performance of financial services provided by their authorised representatives, whether or not their conduct was within authority – unless the lack of authority is disclosed to the client and/or the corporate authorised representative agreement indemnifies the AFS licensee for such liability (which is usually the case).

Where to from here?

While it is currently unclear whether the decision will be appealed, it is nevertheless a timely reminder for both AFS licensees and authorised representatives that regulatory compliance arrangements, including their corporate authorised representative and intermediary authorisation agreements, disclosure documents and terms and conditions with clients are not ‘set and forget’, and instead should be regularly reviewed to confirm ongoing suitability as commercial arrangements and the regulatory landscape develop over time.

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Authored by:

Caroline Ord, Partner
Philip O’Brien, Senior Associate
Patrick Simon, Associate