An Australian Financial Services Licence, or AFSL, is a legal licence provided by the Australian Securities and Investments Commission (ASIC). Certain businesses in the country’s financial services industry are required to have an AFSL, depending on the type of financial products or services they provide.
No matter what kind of financial product or service you offer, you’ll need to understand the ins and outs of AFSLs, including how to secure one, what it means to be a licensee and what your new obligations will include. You’ll also be subject to certain regulatory requirements demanding a high level of compliance.
Fortunately, MIntegrity can help. With a powerful combination of software and expert services, the MIntegrity team is here to support your financial services business from licence application to ongoing compliance obligations.
What is an AFSL?
An AFSL entitles licensees to perform certain tasks for, with and on behalf of financial clients, including:
- Providing financial advice.
- Offering financial products.
- Operating a registered scheme.
- Providing custodial or depository services.
No organisation can legally sell, advertise or deal in financial products or services without an AFSL. You must have this licence from the day you start your business. You offer a financial service or product if you:
- Provide any kind of financial advice, including product-specific recommendations to clients or the general public.
- Deal in or make a market for any financial product, including buying/selling shares on a client’s behalf or regularly quoting prices for buying/selling financial products.
- Provide custodial or depository services.
- Provide services for crowdfunding, superannuation trustees, claims handling and settling, etc.
- Operate the business and/or conduct the affairs of a corporate collective investment vehicle (CCIV).
Note that ASIC provides specific definitions for “financial product” and “financial service” in multiple resources, including regulatory guides, the Corporations Act 2001 and the Corporations Regulations 2001. Depending on your unique circumstances, your organisation may be exempt from the requirement to hold an AFS licence; alternatively, you may be allowed to operate under a limited licence or provide services as an authorised representative of an AFS licensee. If in doubt, always seek legal advice.
ASIC considers the licensing process a “point-in-time assessment” of the organisation, not its owners, employees or offerings. That means ASIC doesn’t endorse any AFS licensee, guarantee its service quality or state that clients won’t incur losses. The commission encourages consumers to check the ASIC Connect Professional Registers to ensure companies or individuals hold an AFSL.
To obtain this licence, your company must complete an AFSL application and meet basic standards of operation in the Australian financial services industry. ASIC will need to be comfortable that you’re capable and competent in performing the type of business specified in your application and that you have sufficient resources to provide those services. It’s your responsibility to maintain these standards throughout the lifetime of your AFS licence. An AFSL application fee is payable and is varied depending on the types of clients you serve, products you offer and complexity of your licence.
AFSL compliance obligations and requirements
To obtain an AFSL licence, you’ll need to meet several requirements. ASIC uses this “checklist” as part of its role as regulator of the financial services industry. The goal is to maintain and improve the financial system’s performance for market participants and consumers alike, promoting confident and informed participation while taking necessary steps to enforce the law.
To do this, ASIC ensures all AFSL applicants can meet requirements in three basic categories:
- Competency: You must be capable of clearly and correctly performing the kind of business you’re applying for, including any special services.
- Resources: You must be capable of supporting your business and clients through your products, services or other offerings. This includes financial, technological and human resources.
- Compliance: Your entire business must comply with obligations including training, conflicts management, insurance, dispute resolution and more.
Although particular requirements depend on your business and the specifics of your application, there are “general obligations” you must follow from the day your AFSL licence is issued. ASIC considers these to be flexible principles and does not give prescriptive guidance on how to apply them; instead, the Corporations Act places that responsibility on individual licensees. For additional guidance see ASIC RG104.
Examples of general obligations include:
- Doing everything necessary to deliver your licensed financial services efficiently, honestly and fairly.
- Having adequate arrangements for conflicts of interest.
- Complying with financial services laws and taking reasonable action to ensure your representatives do the same.
- Maintaining the competence required to provide your financial service or product.
- Ensuring appropriate training for representatives, employees and other team members.
- Establishing and maintaining adequate risk management systems.
- Having a dispute resolution system in place for retail clients.
Note that some obligations will not apply if you’re regulated by the Australian Prudential Regulation Authority (APRA).
The application process
Your specific obligations and authorisations will depend on your AFSL application.
To begin, you’ll need to read three ASIC documents:
- RG 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS licence
- RG 2 AFS Licensing Kit: Part 2 – Preparing your AFS licence or variation application
- RG 3 AFS Licensing Kit: Part 3 – Preparing your additional proofs
These resources provide an overview of the application process, required information and proof documents, instructions and more.
Next, you can scroll through the sample application, which includes all possible questions. Your finalised application may not include all of these questions, but will generally cover:
- Background details for the applying individual or entity.
- Contact information.
- Types of financial service(s) requested for authorisation.
- Details on products and product advice if relevant.
- Net assets, gross revenue and number of current employees.
Another important aspect of your AFSL application is organisational competence. ASIC says an applicant must prove that it has at least one responsible manager, meaning a natural person with the necessary competence to provide the services authorised by the AFS licence. This part of the application asks for details including:
- The responsible manager’s background information.
- Their role in the organisation.
- The services they’ll be responsible for.
- The experience they have.
- How they demonstrate their knowledge and skills.
License management
It’s your responsibility to uphold the licence requirements over time, even as your company and the market change. If ASIC has reason to believe you aren’t compliant, it may take administrative actions such as suspending or cancelling your licence or imposing additional conditions. That’s why “Compliance Arrangements” and “Risk Management” have their own sections in the AFSL application. This includes complying with the conditions of your license and with each relevant financial services law.
AFSL benefits and risks
Having an AFSL makes you an official, legal participant in the Australian financial services industry. This comes with significant considerations, including:
Benefits
- Legality: An AFSL is required for almost all financial activity.
- Flexibility: You’ll have the ability to control how services are offered and to add additional financial services.
- Reputation: As a regulated entity, you comply with the regulations to help demonstrate your organisation is secure and trustworthy.
- Independence: As an AFSL holder, you can demonstrate your independence from other organisations and provide independent advice to clients.
Risks
- Costs: Application fees, regulatory compliance and other costs can quickly add up.
- Risks: New opportunities come with new risks depending on your business and clients.
- Compliance: Maintaining risk and compliance arrangements that are current and relevant to the nature, scale and complexity of your business is an ongoing task. This means that much of the responsibility of interpretation, implementation and regulatory change management is left on your shoulders.
- Scrutiny: Non-compliance can be expensive and time-consuming, impacting your reputation, bottom line, future profitability and more.
Solutions for every AFSL holder
Although every AFSL holder is unique, many challenges and concerns remain consistent across all financial services organisations. Fortunately, there are numerous ways to navigate new responsibilities while getting all the benefits of an AFS licence.
Regulatory libraries
Resources like AFSL newsletters help keep track of regulatory change, but they don’t make direct connections between those changes and your policies and processes. To succeed in this area of AFSL responsibility, many licensees turn to regulatory libraries — digitised repositories that provide direct access to regulatory documents and upcoming changes. These tools, like RegsWeb, make it easy to see when a change has occurred and what updates you need to make to stay compliant.
Consulting and support services
Larger-scale regulatory updates and managing regulatory change may require expert help. AFSL holders can turn to consulting and support services navigating these changes, particularly when they impact significant portions of your existing workflows, client relationships or future plans.
Third-party experts can also help you apply for, update or keep your AFSL. They’ll provide the support necessary to align with regulatory requirements — for example, establishing the operational and compliance frameworks you’ll need to be eligible for an AFSL, or completing independent reviews as part of ASIC administrative action. These are all services that MIntegrity can provide as part of an ongoing support package specifically tailored for your business.
Compliance reviews
Annual or regular Compliance reviews are a must for every AFS licensee. This is the best way to ensure you’re upholding the responsibilities inherent in your licence authorisation — not to mention the quickly changing rules from a variety of financial services regulators across Australia. This is also the perfect opportunity to identify opportunities for improvement, including regulatory change management solutions like RegsWeb.
Policy management
Many AFSL holders struggle to keep their policies fit for purpose; others fail to include clear responsibilities, use consistent language and focus on practicality. Policy management helps address all of these issues and more, keeping your organisation compliant, consistent and organised. By using tools like Regsweb to maintain updated, effective policies that accurately reflect your business practices, you’ll be better prepared to align with ASIC requirements for AFSL maintenance and beyond.
How MIntegrity supports AFSL holders
From financial product advice to crowdfunding, AFS licences cover a huge range of industry services. There’s no “one size fits all” solution — and the MIntegrity team knows exactly what that means for your business.
Here, we’ve helped numerous AFSL holders secure their licenses, build compliance frameworks and enter the market with confidence. We’re your partner every step of the way, from application to licence management, and we have multiple solutions to address ongoing questions and challenges.
Compliance at your fingertips
Our Digital Regulatory Web Service, RegsWeb, is regulatory knowledge management software that gives AFS licensees more control over their policies and procedures. RegsWeb seamlessly integrates regulatory updates with your internal documents, combining MIntegrity expertise with a user-friendly, web-based interface.
Support whenever you need it
At MIntegrity, we know compliance is more than a checklist. That’s why we provide a full range of regulatory risk and compliance services to support AFSL holders. Our services include:
- Startup support.
- Transformation and regulatory change projects.
- AFSL applications and variations.
- Assistance with compliance, operational and risk management frameworks, including all related policies, procedures, processes, registers and governance requirements.
- Assistance with responses to regulatory notices and investigations.
- Review and remediation of AFSL conditions, enforceable undertakings or other regulatory outcomes imposed by ASIC.
- AFSL compliance reviews.
- AFSL training.
- AFSL acquisition due diligence for acquirers.
- Compliance technology selection and implementation.
An AFSL licence gives you independence, but that doesn’t mean you have to face it alone.
Do you have questions about AFSL eligibility, benefits, applications or management? Contact us today for all the help you need.
Sources:
https://asic.gov.au/for-finance-professionals/afs-licensees/
https://asic.gov.au/for-finance-professionals/afs-licensees/do-you-need-an-afs-licence/
https://www.hnlaw.com.au/i-want-to-buy-an-afsl/
https://asic.gov.au/about-asic/what-we-do/our-role/
https://download.asic.gov.au/media/zboexfrp/rg104-published-23-june-2022.pdf
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