If a business offers financial services, including advice, trustees, or other such products, they would need to be authorised to do so by ASIC under an Australian Financial Services Licence (AFSL). When granting such a licence, there are some requirements that potential licensees need to fulfil. These include competency of business, sufficient resources and other obligations.
According to ASIC, the AFSL licence is governed and regulated by the Corporations Act 2001. A business needs to satisfy the requirements in this Act, listed in s 913B, in order to be issued with an AFSL.
- Fit and proper person test (s 913BA) → there is a requirement that a licensee (individual or on behalf of a company) is a fit and proper person to supply financial services to another based on the licence. Generally speaking, the test focuses on good character, absence of material conflict of interest and not being legally disqualified. This test extends to any ‘controller’ in the business as well, such as senior managers or officers.
- Obligations under s 912A → similarly, ASIC must have no belief to the contrary that the obligations under this section would not be fulfilled. If there is a reason to believe so, this requirement is not satisfied.
- Documentation → there is a requirement that if ASIC supplies a written notice with a timeframe to lodge certain documents then this must be complied with. The documents may include an audit (s 913B(3)), with an additional requirement of it being written by a ‘suitably qualified person’. There may be other documentation as well as specified by ASIC in the notice.
ASIC may also either extend the timeframe or withdraw the request for the documentation entirely, and the applicant is required to comply with these changes as well.
- Risk Management Practices → the applicant business or financial services provider is required to have an adequate risk management system in place as part of their obligations under s 192A.
To be eligible for an AFSL, a business needs to be qualified or have the necessary experience to provide the financial services. This can refer to having experienced staff members and those trained in finances. They would also need to meet the obligations outlined by ASIC, including those on risk management, dispute resolution, insurance and training – these are mainly found in legislation as well. The third main point for eligibility is that a business ought to have sufficient financial resources to perform the services and operate as intended.
It is important for a business wanting to provide financial services to be authorised by ASIC with an AFSL, and clarifies any unclear legal requirements and obligations needed for the licence. For more information or assistance, get in touch with our team via the contact form or by calling 1300 337 997.