While the debate still rages over Internet censorship at the hands of the DBCDE, it may be ASIC that lands the first punch in censoring forums and blogs.

The Australian Securities and Investment Commission (ASIC) has released a discussion paper on the need to require Internet Discussion Sites (such as forums and blogs) to hold an Australian Financial Services licence (AFSL) in order to carry posts about financial matters. 

Internet discussion sites (IDSs) are internet websites that provide a place for people who are not financial services professionals to share information, recommendations and opinions about financial products such as shares.

Under the current law, the activities of IDS operators and users may constitute the provision of financial services, for which an Australian Financial Services licence (AFSL) is required. ASIC proposes to update its policy to give specific guidance on which IDSs are likely to need an AFSL. ASIC does not propose to grant IDS operators relief from the financial services licensing and disclosure regimes, meaning operators will need to hold an AFSL unless a pre-existing exemption applies to them.

So far this is just a discussion paper but the language used in the introduction quoted above means that forums, blogs and other social networking sites is that they’re going to may need an AFSL license if it is found that members are discussing financial matters in an ‘advisory manner’.

Information on who needs an AFSL is sketchy even to trained lawyers and this discussion paper makes a significant jump in the concept of who is offering financial services.  It’s beyond the scope of my financial resources to engage a lawyer for advice on this matter and my own legal training is insufficient to cover something this complex – I’ll leave it to my readership to agree or disagree with my reading of the terms above. 

By the term ‘internet discussion sites’ (IDSs), we mean internet websites, such as web-based bulletin boards, ‘blogs’, or chat rooms, that provide a forum for people who are not financial services professionals to display information, recommendations and opinions about financial products.

My interpretation so far is that online communication will now be subject to the same rules that govern commercial communication, even when that conversation is between private citizens. For example, if HotBabe445 posted that she was thinking about buying Telstra shares and BigDaddyXOXO told her not to on the basis that “Telstra sucks”, BigDaddyXOXO may be required to hold an AFSL as, according to the discussion paper,

[...]informal commentary about financial products posted to an IDS may amount to financial product advice.

Slightly more worrying is that the person who runs the forum on which BigDaddyXOXO made his post may need an AFSL as well, regardless of the nature of the forum.

Operators who do not post comments containing financial product advice themselves, but who authorise or arrange for others to post such comments, may also require a licence. This is because authorising or arranging for a thing to be done is generally treated in the same way as actually doing the thing under the Corporations Act.

The exception to this situation would be if the person running the forum had no ability to modify the post or in no way tampered with the post itself.

Of course, confusion sets in with an isolated section that adds an additional restriction on the application of the AFSL.

We think that the current law sets an appropriate line between those who need a licence, and those who don’t, and that there are no policy grounds for ASIC to alter this by granting special relief to IDS operators. Therefore, we consider that if:

(a) a person is providing financial product advice through an IDS (whether as the IDS operator or otherwise); and

(b) the advice forms part of a financial services business,

that person should, like any other provider of financial product advice, hold an AFS licence…

While this puts a dousing on the fire I’ve lit earlier in the article, the bolded requirement is practically meaningless given that the 2001 changes to licensing removed the need for the advice to be part of a business.

The FSR Act replaced the concept of carrying on an ‘investment advice business’ with the concept of carrying on a business of ‘providing financial product advice’…

When taken within the context of the Rudd government’s overall Internet policy base, this is a relatively scary situation. The line between the formal and the informal is being drawn too far into the ‘casual conversation’ zone and risks alienating Australians from the streamlined online participation more modernised countries enjoy. 

Though I may be wrong, comments are appreciated.