The Australian Securities and Investments Commission (ASIC) has clarified its position on the use of restricted terms relating to the independence of financial advisers.

ASIC took legal advice on whether phrases such as “independently owned” are restricted terms under Section 923A of the Corporations Act.

The Act requires that financial service providers only use certain restricted words and expressions if they do not receive commissions, volume-based payments or other gifts or benefits, and operate without conflicts of interest.

While words such as “independent”, “impartial” and “unbiased” are specified as restricted, there was uncertainty about words such as “independently owned”.

“Following external legal advice, our position is that words such as ‘independently owned’, ‘non-aligned’ and ‘non-institutionally owned’, and other similar words or expressions, can be used only if a financial adviser satisfies the conditions set out in 923A,” ASIC says.

“This means that if a financial adviser does not receive any commissions or volume-based payments, or other gifts or benefits, and has no conflicts of interest or influence from any product issuer, they can describe themselves as being ‘independently owned’.

“However, if the financial adviser does receive commissions or operates with conflicts of interest, they will not be permitted to use the term ‘independently owned’ or other like words or expressions.”

The Association of Financial Advisers believes Section 923A is unnecessarily restrictive.

“This is a very restrictive definition that includes a range of factors that, in our view, do not impact upon what we consider to be independence in the delivery of advice,” CEO Philip Kewin said. “It is our view that the test of independence should be in the eyes of the consumer and not influenced by structural considerations included in the current legislation.”