A clean advice sale can still inherit a digital asset problem

ASIC’s final call ahead of the 30 June 2025 deadline concerns firms providing financial product services involving digital assets. It is not a licensing deadline for every business that holds, mentions or discusses a token.

That distinction is the starting point for advice buyers. The transaction question is whether the target, an adviser, an authorised representative or a related entity crossed from discussion into a regulated activity, and whether the activity was conducted under the required authority.

ASIC’s final call for firms to act before its digital asset licensing deadline points firms towards the licensing consequences of providing financial product services involving digital assets. The announcement makes the issue current. It does not, by itself, turn every digital asset reference in an advice file into a breach or a licensing problem.

The diligence challenge is working out which side of that line the target sits on.

The question is activity, not vocabulary

It is reasonable for a buyer to begin with the target’s approved product list and advice proposition. If crypto assets do not appear there, the buyer may conclude that digital assets are irrelevant to the acquisition.

That conclusion is too quick, but the opposite conclusion is also wrong. A reference to Bitcoin, a client question about an exchange or a note recording that a client owns tokens does not, by itself, establish that the practice provided financial product advice or another regulated service.

The legal character of the conduct depends on what happened. The relevant distinctions include whether the practice:

• merely received or recorded a client’s information
• provided factual information or personal advice
• dealt in a financial product
• arranged for a client to acquire or dispose of a financial product
• referred a client to another provider, and what role the referral played
• received a benefit for the referral or other activity
• operated a service involving a digital asset that was itself a financial product.

ASIC’s announcement is directed at financial product services involving digital assets, not at ownership or conversation in the abstract. The buyer therefore needs facts about the service provided, the digital asset or facility involved, the recipient of the service and the authority under which the conduct occurred.

That is why a conventional planning practice may still need to investigate the issue. The relevant activity could be confined to a particular adviser, an authorised representative, a related entity or a referral process. It could also turn out, after review, to be nothing more than factual information or a record of a client’s existing holdings. The point of diligence is to distinguish those outcomes rather than assume either one.

What the deadline changes for a buyer

The deadline creates a concrete reason to ask the question now. A target that provided a regulated financial product service may need to hold the relevant authority, or to have operated within the authority of its licensee and representatives. ASIC’s guidance on applying for and managing an AFS licence sets out the licensing framework in which that question sits.

The deadline does not establish that an advice practice has a licensing issue. It does mean that a buyer should not treat the target’s label, approved product list or management assurance as a complete answer where the conduct has not been tested.

A buyer should ask the target to identify:

• which digital assets, platforms, exchanges or facilities appeared in client work
• whether the target provided advice, dealing, arranging, custody or a referral service
• who performed the activity, including advisers, authorised representatives, contractors and related entities
• when the activity occurred and whether it is continuing
• what fees, commissions, referral payments or other benefits were received
• which licensee, authorisation or approval was relied on.

These are diligence questions, not conclusions that a breach occurred.

Test the conduct against the structure

An authorised representative may operate within a licensee’s business while also having relationships with other entities. A buyer should map those relationships rather than assume that the central practice file captures everything done under the representative’s name or through an associated business.

ASIC’s financial advisers and authorised representatives portal can help reconcile the people and entities described in the transaction documents with the registered structure. It does not answer whether a particular service was authorised, and it should not replace the licensee’s records.

A referral illustrates why the distinction matters. A practice may give a client the name of a provider without providing advice about a financial product. Another referral may be part of an arranged transaction, accompanied by a recommendation, or supported by a payment or other benefit. The label “referral” does not resolve the regulatory character of the conduct. The underlying facts do.

Files should resolve the uncertainty

The most useful evidence will usually be found at client level. Review files that contain high-risk discussions, external product references, unusual portfolio changes, cash transfers or notes about digital assets. Then compare those files with referral registers, approved product lists, conflicts registers, complaints, breach reports, monitoring results and compliance committee records.

Review the communication sequence. What did the client ask? What did the adviser say? Was information presented neutrally, or was a product or provider presented as suitable? Was the client directed to another party? Was an application, transaction or account opening facilitated? Was a benefit received?

A note such as “client considering crypto” is not enough to answer those questions. Nor is the absence of the word crypto from a file enough to show that no relevant activity occurred.

If the records do not explain what happened, that is a transaction uncertainty. It is not proof of misconduct, and it does not automatically require a warranty, retention or completion condition. It may, however, justify further sampling, targeted representations, a specific allocation of investigation costs or a remediation plan. Those are prudent transaction responses to unresolved facts, not consequences ASIC has prescribed in its final call.

Allocate unresolved work before completion

The parties should decide before completion who will investigate any unresolved activity, who will deal with the licensee, and how any client or regulatory response will be managed if the facts show that further action is required. Whether that belongs in a warranty, condition, retention, indemnity or post-completion workstream will depend on the evidence and the transaction documents.

The incoming owner should also confirm how the licensee and representative arrangements will operate after completion. ASIC’s information on changing licence details through the Regulatory Portal deals with administrative changes. It does not determine whether historic conduct was authorised, but it is a reminder to reconcile the post-transaction structure with the business that is actually being acquired.

The deadline matters where the target may have provided a financial product service involving digital assets. Buyers should identify the activity, classify what occurred, test it against the licence and representative structure, and allocate any unresolved work before completion.

A clean sale is not demonstrated by the absence of a digital asset strategy. It is demonstrated by evidence that the target’s conduct, permissions, supervision and client records match.¹