Regulatory guides are published by ASIC to give guidance to regulated entities by explaining when and how ASIC will exercise specific powers, to explain how ASIC will interpret the law, to describe principles underlying ASIC’s approach, and to give practical guidance describing the steps of a process such as applying for a licence.

Financial Services

Regulatory guide one gives practical guidance to applicants for an Australian financial services licence (AFS licence). An AFS licence authorises you and your representatives to provide financial services to clients. Without an AFS licence, you generally can’t carry on a financial services business.

Financial services are provided if you:

  • provide financial product advice;
  • deal in a financial product;
  • make a market for a financial product;
  • operator registered scheme;
  • provide a custodial or depository service;
  • provide traditional trustee company services; or
  • provided crowdfunding service.

Main considerations in AFS Licence applications

ASIC assesses applications for AFS licences as part of its role as the regulator of the financial services industry. ASIC considers whether an applicant is competent to carry on the kind of financial services covered by the license, has sufficient financial resources to carry on the business that is proposed, has an adequate risk management system in place, and can meet other obligations under the AFS licence.

The application process

An applicant for an AFS licence must complete an application consisting of form FSO1 and supporting core proof documents. Before beginning work on an application, an applicant must understand the business and understand which financial services and products are proposed to be provided and must understand the obligations of an AFS licensee and have appropriate systems and processes in place.

As part of the application process, an applicant must choose the authorisations that it requires as detailed in part two of the AFS Licensing Kit. The choice must be based on the authorisations that will be required, not on those that may be required at some point in the future. If an AFS licence holders’ business changes, it must vary its license at that point in time.

The application form itself is found online and as an applicant completes the online form, it will tailor itself so that only those questions relevant to the applicant are shown. In order to get access to the online form, an applicant will need to register for the elicensing system.

There are five parts to the online application and these are:

  • Part A where you enter your details as the applicant and the details of a contact person. Here you will also select the financial services and products that you want to be authorised to provide an answer questions that give a description of your business.
  • Part B where you will be asked questions that relate to the obligations you will have as an AFS licensee and your ability to comply with them.
  • Part C which will display where complex financial services or products have been selected in Part A. Part C will include more detailed questions about those services.
  • Part D which will include declarations and certifications based on your answers in Parts A and B.
  • Part E which will include the core proof documents to send as part of the application.

Once you’ve completed the form you can print a draft of it for checking. It is a criminal offence to make a false or misleading statement in the application. The system will calculate the relevant fee to be paid.

When you submit the form, you must immediately send ASIC:

  • a scanned and signed print out of the form and copies of the proof documents; and
  • a cheque by post if you haven’t already paid the application fee by BPAY.

There is no set time line for approval of an AFS licence. The length of time that an AFS licence takes to be approved will depend upon the completeness of the original application including the description of the applicant’s business and how quickly the applicant responds to requests for information from ASIC.

Corporations Act 2001 requirements

AFS licence holders are required to comply with a range of obligations under the Corporations Act. Importantly, these include obligations under section 912A and section 912B. In understanding and complying with these obligations, prospective licensees should develop an obligations register which sets out all of the applicable obligations and specifies controls for each.

Proof documents

As part of an application for an AFS licence, an applicant will need to provide proof documents. The number and type of proof documents will depend on the complexity of the financial services and products that are proposed to be offered.

The four core proof documents you will need to include in your application include:

  • A5 business description;
  • People Proofs for each responsible manager;
  • B1 organisational competence including a table of organisational competence and if relevant submission on the responsible managers’ competence; and
  • B5 financial statements and financial resources unless you’re regulated by APRA.

In our next article, we will consider the contents of proof documents in further details alongside the obligations of an AFS licensee.

Leave a Reply

Your email address will not be published. Required fields are marked *