We've observed quite a few changes in ASIC's
approach to licence applications, especially over the past year or
two. This is the second and final blog in the series which
considers those changes, as well as the current trends in licence
applications and variations.
Competence of ACL responsible managers
If you applied for your ACL during or just after the transition
period, you may remember that ASIC's benchmark for competence
was "two years of relevant, problem-free experience" as
RG 206. While the language in the guidance has not changed, we
have noticed significant differences in how ASIC is interpreting
the concept of "relevant experience".
During and just after the transition period, ASIC would accept
experience as relevant where someone had worked in a business
providing credit and had some experience in the provision of the
credit. It was unusual for an analyst to question the experience of
a potential responsible manager unless it was clear that there was
no relevant credit experience, or the experience was not
'problem-free' (such as being disciplined by a professional
Over the last year or so, we have noticed analysts asking many
more questions about experience. Currently, we do not recommend
nominating a responsible manager unless they have at least two
years of experience working under another ACL in a substantially
For example, for credit providers providing consumer leases,
ASIC has rejected responsible managers that have been working as
mortgage brokers, because a broker (who is only providing services
other than as a credit provider) will not have experience in some
key areas of the credit provider's business, such as assessing
Justification of international businesses
Many businesses that hold an AFSL do not just operate in
Australia, but may service clients across the globe. This model is
especially prevalent in models based online, such as online
derivatives or forex traders. Following actions over the past year
(as previously reported in T-REX), we are
seeing increased instances where ASIC will ask an application or
licensee to show how they are legally operating in all overseas
jurisdictions where the business has clients.
ASIC's view is that a licensee cannot be providing their
services efficiently, honestly or fairly if they are operating in
an unlicensed or illegal fashion overseas. Therefore, we expect
such enquiries to become more common, and we recommend all
licensees ensure that they can answer such queries when they arise.
This may involve obtaining legal advice from the overseas
jurisdictions in which you operate.
Focus on certain business lines
As we alluded to earlier, over the past couple of years ASIC has
shown an increased focus on certain types of businesses, and
applicants in those businesses can expect a higher level of
scrutiny of their applications. For AFSLs, such businesses include
money remittance, OTC derivatives products, margin forex products
and robo-advice. For ACLs, consumer lease businesses and payday
lenders are highly scrutinised.
If your business falls within these categories, even if you are
only varying your licence, you should expect a lengthy application
process as the analyst is likely to request a lot of information
about your business model. If you have any prior instances of
breach or non-compliance, expect these instances to be
There are also several reviews and legislative changes that may
affect the licensing regime. As we have reported previously, the
new crowd-sourced equity funding legislation may be an opportunity
for ASIC to reconsider how it assesses responsible managers for
The implementation of the recommendations in the
Murray Report is still in the early stages, and may lead to
changes in how ASIC operates. Moving to a user-pays revenue model
may assist to alleviate some of the current resourcing constraints
to which ASIC currently finds itself subject.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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