Australia: Recent Comments From ASIC Regarding Licensing

Last Updated: 31 March 2017
Article by Ruth Neal and Iris Dielmann

Members of our team were invited to attend a licensing liaison meeting at ASIC's offices in Sydney last Thursday.

Below are some matters discussed by ASIC which may be of interest to you.

  1. Timing of ASIC's AFSL application evaluation process: The time that ASIC takes to process AFSL applications, including applications to vary an AFSL, is currently longer than usual due to the increase in ASIC's workload on limited licences (for accountants). At the moment, an application for a new AFSL which involves no complications or issues is taking approximately 7-8 months to process. ASIC expects this timeframe to reduce to 2-3 months by the end of June when it completes its assessment of all outstanding limited licence applications. ASIC was less specific in relation to current timeframes for processing AFSL variation applications, indicating only that such applications are taking less time than new AFSL applications. However, ASIC is only completing 21% of variation applications within its target of 60 days.
  2. Commencement of ASIC industry funding model on 1 July 2017: The new ASIC industry funding model (or 'user pays' model) commences on 1 July 2017 (though collection of levies will not occur until January 2019 in respect of the 2017/2018 financial year). As the amount of the levy will be determined by the number of authorisations a licensee holds, ASIC recommends that licensees should review and 'rationalise' their AFSL by removing any authorisations that are no longer necessary in order to minimise the amount payable.
  3. Compliance plans: ASIC remains heavily focussed on culture. It expects compliance plans to be tailored to and reflect the business being operated by the licensee and that compliance plans should be used by the business to help build a culture of compliance. If a licensee submits an application to vary a licence, ASIC will look at the licensee's compliance plan to see whether it needs to be updated to reflect the proposed business.
  4. Innovation Hub: ASIC encourages advisers and fintechs to engage ASIC in discussions at an early stage of establishing a business as ASIC may be able to give valuable insight at that early stage as to what licences and authorisations a fintech may need. This early engagement on authorisations can halve the time taken by ASIC to evaluate the licence application. There have also been instances where ASIC has been able to tell a fintech that no licence is required for the proposed business.
  5. Retail OTC derivatives: ASIC considers these to be high risk products and referred to its recent review of the retail OTC derivatives industry. ASIC says that when it receives an application for a licence with authorisations (including for 'making a market') in relation to retail OTC derivatives, it will assess the application very carefully, particularly where ASIC has concerns that the responsible managers put forward do not meet the necessary requirements. ASIC also has concerns regarding misleading and deceptive conduct in providing information in statements of personal information and declarations in licensing applications and warned that it is open to ASIC to commence investigations which could result in criminal proceedings.
  6. Reference checking for financial advisers: ASIC has had concerns regarding the adequacy of reference checking of advisers in the context of poor advisers moving from licensee to licensee. ASIC strongly recommends robust reference checking of financial advisers. It referred to Standard Australia's handbook 'Reference checking in the financial services industry' as guidance in carrying out reference checks on financial advisers (please click here for more information). It also referred to the Australian Bankers' Association Reference Checking & Information Sharing Protocol applicable to licensees who subscribe to that Protocol (please click here for more information).
  7. Financial advisers register: ASIC reminded meeting participants that licensees need to provide ASIC with certain information about their financial advisers who provide personal advice to retail clients on relevant products (essentially financial products other than basic banking products, general insurance and CCI). ASIC will be contacting licensees who have not provided the required information. Further, licensees holding, but not using, a personal advice authorisation may wish to have this authorisation removed for the reasons mentioned above in relation to the new industry funding model.
  8. New licensees portal and application screens: ASIC will be updating its regulatory technology platform over the next 3 years. This will include a new licensees portal and a new licence application process aimed at collecting more information at the time of application, and reducing application processing times. The new system would see the end of paper lodgement, with all requisitions and other correspondence being made through the portal.
  9. Responsible manager capacity: ASIC has concerns regarding the number of licences an individual can be a responsible manager for. For example, ASIC said that if an individual with a full time job, who also acts as a responsible manager for hire on three other licences, was put forward as responsible manager for a further licence, it may consider that individual to be overloaded. It is possible that ASIC will release guidance on this point in the future.

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