Licensing of settlement agents

Transcription

1 Government of Western Australia Licensing of settlement agents This fact sheet outlines the licensing and registration requirements for the real estate and business broking industries. In Western Australia, individuals, partnerships or companies wanting to operate as settlement agents are required, by law, to be licensed. To obtain a licence a number of legal requirements must be satisfied. The requirements for acquiring a real estate settlement agent licence differ from the requirements for acquiring a business settlement agent licence. This is because of differences in the knowledge and skills used by the two types of settlement agent. Real estate settlement agents or business settlement agents are sometimes referred to as conveyancers. The Settlement Agents Supervisory Board the licensing authority The Settlement Agents Supervisory Board (SASB) administers the Western Australian settlement licensing and regulatory regime. SASB is a statutory authority responsible for the administration of the Settlement Agents Act 1981 (the Act), the Settlement Agents Code of Conduct 1982 (the Code of Conduct), and the Settlement Agents Regulations 1982 (the Regulations). The key objective of SASB s licensing system is to ensure that all real estate and business settlement agents have appropriate skills, knowledge and experience, and have adequate financial resources to carry out their functions effectively. SASB meets monthly to consider licence applications. Settlement Agents Supervisory Board Licensing of a settlement agent A real estate settlement agent ensures all aspects of a real estate transaction are fulfilled to the satisfaction of a client. In contrast, a business settlement agent must ensure that all the property and commercial aspects of a business transaction are fulfilled to the satisfaction of a client. A licence alone does not give the licensee the right to carry on business as a settlement agent. A licensee must also hold a current triennial certificate in order to operate legitimately in the industry. SASB issues successful applicants with a triennial certificate at the time a licence is granted. The triennial certificate is subject to renewal every three years. There are three types of real estate or business settlement agent licences that SASB may grant: a licence for an individual or natural person; a licence for a firm or partnership; and a licence for a body corporate. An individual licence is suitable for someone wanting to operate as a sole trader or supervise the business of a licensed real estate or business settlement agent which operates under the structure of a body corporate or firm. A firm or partnership licence will suit a group of individuals and/or bodies corporate in a business partnership. The Forrest Centre, Level 6, 219 St Georges Terrace Perth, Western Australia 6000 (weekdays 8.30am pm) Real Estate and Settlement Advice Line: Post: Locked Bag 14, Cloisters Square, WA 6805 Admin: Facsimile: contactus@sasb.wa.gov.au

2 2 Only a company that is incorporated under Australian Corporations Law may apply through its directors for a body corporate licence. Regardless of the type of licence, the trading name of the agency will need to be registered with the Department of Commerce if it is different to the name of the licence holder. The Act stipulates that a licensed real estate or business settlement agent must be a person of good character and repute as well as a fit and proper person to hold a licence. The same applies to directors and partners of firms and bodies corporate. SASB considers a number of factors in reviewing the character, repute and suitability of an applicant or persons associated with an applicant. Requirements for individuals Applicants for individual licences must hold the prescribed qualifications and have completed two years sufficient practical experience in the industry immediately preceding their application for a licence (except certified legal practitioners). SASB requires applicants to provide two written references in the form of a statutory declaration, to attest to their practical experience in arranging and effecting the settlement of real estate and/or business transactions. It is preferable that these references are supplied by a licensed settlement agent or solicitor who has been the applicant s supervisor or employer. Applicants must also provide an original National Police Certificate that is issued no more than one month prior to the date of application. The National Police Certificate can be obtained from a participating Australia Post outlet. Applicants for a real estate settlement agent licence must have at least one of the following three qualifications*: 1. Be a certified legal practitioner within the state of Western Australia; or 2. A Diploma of Financial Services (Conveyancing) and the following two core competencies, which have been extracted from the National Competency based Diploma of Conveyancing and Advanced Diploma of Conveyancing course: - Obtain and analyse all information for the transaction (FNSCONV601A) - Negotiate to achieve goals and manage disputes (FNSICORG603A); or 3. The following seven core competencies, which have been extracted from the National Competency based Diploma of Conveyancing and Advanced Diploma of Conveyancing course (recognised until 30/06/2009): - Take instructions in relation to a transaction (FNBCNV01A) or - Take instructions in relation to a transaction (FNSCONV501A) - Obtain and analyse all information for the transaction (FNBCNV02A) or - Obtain and analyse all information for the transaction (FNSCONV601A) - Liaise with clients, other professionals and third parties (FNBCNV03A) or - Develop and nurture relationships with clients, other professionals and third parties (FNSICCUS501A) - Negotiate to achieve goals and manage disputes (FNBCNV04A) or

3 3 - Negotiate to achieve goals and manage disputes (FNSICORG603A) - Prepare and/or analyse and execute documents (FNBCNV05A) or - Prepare and/or analyse and execute documents (FNSCONV502A) - Establish, manage and administer trust accounts (FNBCNV05A) or - Establish, manage and administer trust accounts (FNSCONV503A) - Finalise transactions (FNBCNV07A) or - Finalise conveyancing transactions (FNSCONV504A) People wishing to obtain a business settlement agent licence must undertake an additional module, Business Settlement Agents Licensing Course. *The qualifications listed above were correct at the time of printing, but may have changed since, and people wishing to apply for a licence should check with SASB. Applicants for a real estate or business settlement agent licence must also: be 18 years of age or older; have sufficient financial resources available to comply with the requirements of the Act; be a resident of Western Australia; and understand fully the duties and obligations imposed by the Act on settlement agents. New real estate or business settlement agents agree to: attend a SASB trust account seminar within six months of the approval date of their licence and triennial certificate; and comply with any conditions imposed by SASB on their licence or triennial certificate. Requirements for partnerships or firms A partnership or firm may also hold a real estate or business settlement agent licence. To obtain and continue to hold a settlement agent licence all individuals constituting a firm, all directors of a body corporate that is a partner in a firm, and the person in bona fide control must satisfy SASB that: they are of good character and repute, as well as fit and proper to be volved with the settlement agency; and they have sufficient financial resources available to them to comply with the requirements of the Act. Where a partnership or firm applying for a licence is constituted by no more than three partners then at least one partner must be an appropriately licensed settlement agent. However, if the partnership or firm is constituted by more than three partners then at least two of the partners must be appropriately licensed settlement agents. Finally, the person responsible for the day-to-day operational management of the settlement agency referred to in the Act as the person in bona fide control of the business must also: be a licensed settlement agent holding an appropriate licence; hold a current triennial certificate; and be a resident of Western Australia.

4 4 If a partnership or firm or body corporate engages a person to be in bona fide control, they must comply with SASB policy and ensure that a signed employment agreement is provided where the nominated person in bona fide control: holds less than 50 per cent of the company s shares; or holds less than 50 per cent unit holding in the Unit Trust; or has less than a 50 per cent ownership in the partnership. A partnership or firm holding a licence must notify SASB of any changes to the business management structure because this type of change could affect the licensing requirements. Requirements for bodies corporate A company may also hold a real estate or business settlement agent licence. The Act refers to a company as a body corporate. To obtain and continue to hold a real estate or business settlement agent licence (or both) a body corporate must satisfy SASB that: all of the directors and the person in bona fide control of the body corporate are of good character and repute, and are fit and proper to be involved with a settlement agent s business; and the body corporate has sufficient financial resources available to it to comply with the requirements of the Act. Where a company has no more than three directors then at least one of them must be an appropriately licensed settlement agent. However, where there are more than three directors of the company then at least two of them must be appropriately licensed settlement agents. The person in bona fide control of the body corporate must meet similar requirements detailed above for partnerships. An incorporated company holding a licence must notify SASB of any changes to the business management structure because this type of change could affect the licensing requirements. Formal hearings Where there is doubt that an applicant for a settlement agent licence meets the requirements of the Act, SASB may hold a formal hearing to consider the application. At a formal hearing an applicant may appear personally or be represented by a lawyer. Licensing decisions are reviewable decisions. Any person aggrieved by a reviewable decision of SASB may apply to the State Administrative Tribunal for a review of the decision. Mutual recognition Under the Mutual Recognition (Western Australia) Act 2001, SASB may issue licences to settlement agents who currently hold an equivalent licence in other States or Territories in Australia. The mutual recognition legislation seeks to address the mobility of the Australian workforce by permitting licensing authorities in Western Australia to grant a triennial certificate to applicants who are currently licensed as a settlement agent/conveyancer in another jurisdiction. Any licensed real estate or business settlement agent from other States or Territories in Australia considering operating in Western Australia may call SASB Administration on to obtain further information.

5 5 A settlement agent s key responsibilities There is enormous responsibility placed upon real estate and business settlement agents because of the nature of their work and the large sums of money they deal with. All settlement agents must ensure that: there is adequate supervision of the settlement agency s staff; and the settlement agency s trust accounting procedures comply with the requirements of the Act. Supervision Whether the business is carried on as a licensed individual, partnership, or body corporate, there must be adequate supervision of all agency staff and control over their work. One element of supervision specified in the Act is that every firm and body corporate must supervise the business through a nominated person in bona fide control. Where the business is operated by an individual, the licence holder is personally responsible for the supervision of all activities of the business. The person in bona fide control of the settlement agency is responsible for ensuring that the business of the partnership or body corporate is conducted in accordance with the Act, the Regulations and the Code of Conduct. For this reason, rule 13 of the Code of Conduct requires that if the licence holder is an individual, then the person must give substantial attendance at the registered office, and ensure that the managers of any branch offices (who must also hold a settlement licence and current triennial certificate) give substantial attendance at their respective branch offices. Similarly, if the licence holder is a partnership or a body corporate then the partners or directors and the person in bona fide control of the agency must ensure that the person in bona fide control gives substantial attendance at the registered office and the managers of any branch offices (who must also hold a settlement licence and current triennial certificate) give substantial attendance at their respective branch offices. SASB considers the supervision of the work of a settlement agency by a licensed settlement agent essential to reduce the risk of error in transactions, and ensuring compliance with the Act, Regulations and Code of Conduct. Mistakes being made by employees are more likely to be reduced when a licensed settlement agent is closely monitoring the work of the agency. Trust accounting procedures Trust accounting is the general term used to refer to the accounting records and practices required under the Act to enable settlement agents to properly account for trust money under their control. The Act and the Regulations require the strict maintenance of a formal set of accounting records that can show at any time the state of a settlement agent s trust account(s). A copy of the Settlement Agents Supervisory Board Trust account handbook is available online from or by contacting SASB at the address below: SASB Locked Bag 14 Cloisters Square Perth WA 6850 Telephone: Fax:

6 6 Every settlement agent who holds a triennial certificate is required to maintain one or more trust accounts. All trust money must be held in a trust account at a prescribed financial institution such as a bank, building society or credit union in the settlement agent s name in accordance with SASB s requirements. Whenever a trust account is opened, closed or amended, a settlement agent must advise SASB in writing as soon as is practicable. All licensed settlement agents are required to have their trust accounts audited. The auditor must deliver either an audit report or a statutory declaration to SASB within three months of the end of each financial year. In addition to the annual audit, a settlement agent who has commenced trading for the first time is required to have a quarterly audit conducted covering the first three months of the agent s business operating. Proactive compliance SASB conducts a Proactive Compliance Program. The purpose of the program is to promote and improve the level of compliance and ethical standards in the settlement industry. The involvement with the program is on a voluntary basis and SASB s proactive compliance officers visit agencies to provide advice and examine their level of compliance with legislative requirements, including those for trust accounts. The proper keeping of trust accounts by settlement agents is essential for maintaining public confidence in the settlement industry. SASB closely monitors the compliance of settlement agents in meeting the trust accounting legal requirements and takes firm action whenever any irregularity is detected, however minor. Auditor independence The Board considers that an auditor s independence is of the utmost importance. All settlement agents and their auditors must keep this in mind and act accordingly. Under the Act, all settlement agents must appoint an auditor to audit their trust accounts. SASB recognises that an agent s performance in the management of their trust account is a prime indicator of compliance practices generally. SASB places significant reliance on audit reports to monitor settlement agent s compliance with the statutory requirements. The credibility of the audit report is affected by both the actual and perceived independence of the auditor. Under the Act, auditors must immediately inform SASB of any close relationship through blood, marriage or a de facto partner, as well as any business dealings they have or have had, with any settlement agent whose trust accounts they have been appointed to audit. The term business dealings includes any dealings auditors or any employees, partners etc, of their firms have or have had with their settlement agents, including but not limited to general accountancy, financial advisory and taxation work for the agency. Business dealings also include any financial interests shared with the settlement agent, as well as the use by the auditor of any services provided by the agent. When in doubt as to whether any business relationship constitutes a business dealing, auditors should disclose the dealing to SASB for consideration.

7 7 SASB will consider each disclosure on a case-by-case basis. Where it is found that a settlement agent auditor relationship is sufficiently significant to warrant the disqualification of the auditor, SASB will consider a written submission from the auditor as to why they should be retained. Special consideration will be given to instances where disqualification will create hardship or difficulty for the settlement agent, such as in some regional areas where it may be difficult to engage another auditor. Costs of a licence The cost of a settlement agent licence consists of a licence fee and a Fidelity Guarantee Account payment. The Fidelity Guarantee Account is used to reimburse people who suffer pecuniary loss or loss of property through the criminal or fraudulent actions of a licensed settlement agent who holds a current triennial certificate, or any of their employees, in the undertaking of a settlement transaction. All licence applications for a real estate or business settlement agent licence incur a fee. The fees are as follows: natural person - $654 firm or body corporate - $856 An additional payment of $150 for the Fidelity Guarantee Account applies to all licence applications. Applicants wanting both a real estate and business settlement licence must pay for both licences and make two payments to the Fidelity Guarantee Account. Renewal of triennial certificates costs $421 for all licence types, and requires another payment to the Fidelity Guarantee Account of $150. Compulsory professional indemnity and fidelity insurance The Act requires that all licensed settlement agents carrying on a business have professional indemnity and fidelity insurance cover. The professional indemnity insurance generally covers a settlement agent s client for any act, error or omission by the settlement in the course of their professional duties. Fidelity insurance covers a settlement agent for loss suffered as a result of theft by his/her employee(s). The fidelity insurance cover is separate to the Fidelity Guarantee Account administered by SASB. SASB holds a master insurance policy for all settlement agents that provide professional indemnity and a fidelity insurance cover. Therefore, all settlement agents are required to be insured under the master policy specified by SASB. The Compulsory Professional Development Program The Compulsory Professional Development (CPD) program commenced on 1 January 2008 for all natural persons who are licensed real estate or business settlement agents and are the holder of a current triennial certificate. The CPD program has been designed to assist agents in updating their knowledge and skills in the areas of industry practice, legislative change and work practices. SASB believes this will increase levels of consumer protection and public confidence in the industry, promote greater professionalism among agents, and improve the knowledge and skills of agents.

8 8 The CPD program operates on an annual cycle based on a calendar year. In each 12 month cycle, participants must accumulate a minimum of six points of CPD activity. Each year SASB will approve and publish on its website, specific training courses that can be attended to complete the required six CPD points for that year. Of these six points, at least four points must be earned from the core CPD activities and a further two can be obtained from either core or elective CPD activities. Any additional points cannot be carried over to the next calendar year. Further details of the CPD program can be found on the SASB website at or by contacting the CPD enquiry line on Contact details General inquiries about settlement matters can be handled by calling on for the cost of a local call from anywhere in the State. Inquiries about real estate or business settlement agent licensing matters can be handled by SASB staff on All application forms and Board policy with respect to licensing of settlement agents are available on SASB s website at under Licensing in the For Agents section. This publication contains general information that was current at the time of publication. If you have specific inquiries about matters relating to your situation then you are strongly urged to seek independent professional advice. The producers of this publication expressly disclaim any liability arising out of a reader s reliance on this publication. This publication was produced by the Settlement Agents Supervisory Board. DP099386/ July 09/ Online only National Relay Service: Quality of service feedback line: This publication is available in other formats on request to assist people with special needs.