Australian Financial Services License

AFSL requirements

Chapter 7 of the Corporations Act 2001 (Cwth), as amended by the FSR Act, requires an entity to hold an AFSL if the entity carries on a business involving the provision of a financial service and/or a financial product.

Briefly, financial services are defined in the Act as:

• providing financial product advice (personal and/or general);
• dealing in financial products (includes issuing and/or arranging);
• making a market in financial products;
• operate a registered scheme;
• providing a custodial or depository service.

Again briefly, financial products are defined as an instrument used to:

• manage a risk
• make an investment
• make a non-cash payment

Classes of financial products are also defined and include superannuation, derivatives, foreign exchange, securities and government securities, amongst others.

An entity may apply to be authorised to provide one or more type of financial services, and/or one or more financial product class to retail and/or wholesale clients. Financial product/service delineations and boundaries are complex and it is easy to overlook or inaccurately define an aspect of your activities – advice should be sought to ensure you seek and obtain the appropriate authorisations, as there are serious penalties and repercussions for operating without an AFSL or without the correct authorisations.

What is the process for applying for an AFSL?

1. Lodgment of the electronic application on-line with ASIC (hard copy and proofs to be lodged within 20 days of finalising on-line application). The application form is divided into 5 parts:

• Part A – Applicant and AFS licence details
• Part B – AFS licensee requirements
• Part C – Specific questions for more complex products and/or services
• Part D – Declarations and certifications
• Part E – Proofs and evidences

2. Nomination of appropriately experienced and skilled Responsible Officers;

3. Lodgement of the following proofs (together with supporting documentation) with the initial application:

• A5 Business Description
• People proof for each nominated Responsible Officer (this comprises the 2
  business references, police check, insolvency check and the Statement of Personal Information)
• B1 Organisational Expertise Table
• B5 Financial Resources (together with financial statements)

4. Lodgement of some or all of the following statements (‘proofs’) within 10 business days of a specific request by ASIC, together with supporting documentation (evidence, policies & procedure manual, certain disclosure documentation etc):

• B2 Development Program for Responsible Officers
• B2 Industry Standards Compliance
• B3 Compliance Arrangements
• B3 Outsourcing Statement
• B3 Conflicts of Interest Arrangements
• B4 Program for monitoring, supervision and training of Representatives
• B5 Human Resources Capacity Statement
• B5 Information Technology Capacity Statement
• B6 Dispute Resolution System Statement
• B7 Risk Management System Statement
• B8 Compensation Capacity Statement
• B9 Research Statement
• C1 Operate a custodial or deposit service
• C1 IDPS Statement
• C1 Funds under management/custody Statement
• C1 Product/Service distribution Statement
• C2 Scheme operating capacity Statement
• C2 Scheme Property Statement
• C2 Funds under management details
• C2 Product Distribution Channel Report
• C3 Market Maker Statement
• C4 Derivatives Statement
• C5 Foreign Exchange Operating Statement
• C6 Horse Racing Syndicate Statement
• C7 Life Insurance Capacity Statement
• C8 Underwriting Agency Capacity Statement
• C9 MDA Operator Capacity Statement

What can Block Legal & Compliance do for AFSL applicants?

1. advise you regarding ASIC requirements and the appropriate authorisations to obtain;

2. project manage or review your AFSL Application or Variation;

3. draft policies and procedures (including comprehensive Compliance Manual) and/or application proofs;

4. liaise with ASIC to finalise your AFSL application or variation;

5. provide training and workshops to staff and Boards regarding the process and applicable legal/regulatory requirements;

6. provide specialised assistance in key areas such as drafting of legal contracts and disclosure documentation;

7. review and advise regarding marketing materials and website disclosures;

8. provide implementation advice and guidance once AFSL is obtained; and

9. provide ongoing compliance oversight and reviews, and training, once AFSL has been granted/varied.

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