AFSL requirements are complex, and requirements and authorisations change depending on the nature of your financial services business. There is only one AFS Licence, but there are many different types of authorisations that might appear on it depending on what kind of financial services you provide and the financial products that relate to those services.
It can be difficult to know what authorisations your business needs when applying for an AFSL.
At CNM Legal, we specialise in financial services licensing and AFSL applications of all levels of complexity.
In this article, we are going to address some frequently asked questions about financial services licensing, including some guidelines about who needs an AFSL, and who does not. We have addressed some of the questions that are not always obvious.
The following guidelines are by no means exhaustive and do not constitute legal advice. Please download our AFSL application guide for more information about applying for an AFSL, and contact us for AFSL legal advice expressly tailored to your business.
For more information, see our website at www.cnmlegal.com.au
Do I need a retail or wholesale AFS licence?
The first question you will need to address before applying for an AFSL is whether you will be providing financial services to retail clients, wholesale clients, or both.
If your market is retail, your application will require additional proof that you hold professional indemnity insurance, are a member of an external dispute resolution scheme (read: AFCA), and that you comply with training obligations in regard to advice to those retail clients.
What if I only provide the service to wholesale clients? Do I need an AFSL?
Yes. Contrary to opinions frequently given to people we talk to, you do need an AFSL to provide financial services to wholesale clients, unless an exemption applies.
Do you still need an AFSL if your clients are overseas?
Yes. If you operate a financial services business in Australia, even if all of your clients are offshore, you are required to have an AFSL. This has been tested in court, where the court found that:
“It was clear that Woodlawn carried on its ‘financial services business’ in Australia because it bought and sold securities and derivatives in Australia (which were largely Australian instruments), Woodlawn’s offices were located in Australia and it conducted its business in Australia.”
See the full article here.
What if you only offer a financial service or product as a one-off?
This is not an easy question. The answer is that you probably do not need an AFSL. Probably. But when is something a ‘one-off’? One piece of advice on a product to one person? One fund? One offer?
The test that is applied in this case is the ‘business test’: that is, are services provided with ‘ system, repetition and continuity.’ One-off transactions are not normally considered as meeting this business test, but they could be.
Ask yourself this: is this thing a side hustle to my side hustle? Am I going to do it in an amateur way, wearing shoes that are too long, a bright red nose and a flower on my shirt that squirts water? If the answer to these questions is ‘yes’, then you are unlikely to be ‘in the business’ of providing those services and are more likely to be performing at a five-year-old’s birthday party.
We strongly suggest that you contact us to clarify whether you meet the ‘business test’. Toot your horn even, on your little car.
What if you publish or broadcast a show, blog, or newspaper that offers financial advice?
If the advice offered is general in nature and available publicly, you do not require an AFSL — as long as your form of media does not have the provision of financial advice as its sole or principal purpose.
Do you need an AFSL if you provide financial services as a representative of an existing AFSL licensee?
No. (However, if you are a representative of a licensee, you may have to hold an authorisation from that licensee.)
Similarly, you also do not need an AFSL to provide financial services to an existing AFS licensee, or to someone who is exempt from AFSL requirements.
What if your service to clients consists only of referrals to licensees?
No. If you do nothing other than refer people to AFS Licensees, you do not need an AFSL. But the content of that referral must be so limited, it could only properly be given by a Dalek: you can only provide the contact details and name of the licensee and a statement that they might be able to assist you. You must disclose any financial compensation you receive for any such referrals. Exterminate!
Do energy retailers need financial services licences?
In many cases, yes. Please refer to our Industry Insights article on this topic.
I deal in derivatives and/or foreign exchange accounts on my own behalf. Do I need an AFSL?
Depends. If you deal on your own behalf for the purpose of managing a financial risk that arises in the ordinary course of a business, you do not need an AFSL.
However, if you deal in derivatives or foreign exchange contracts as a significant part of your business, you do need an AFSL.
Do providers of funeral expenses facilities require an AFSL?
Yes. The regulations have changed. Since 2021, all providers of funeral expenses facilities that meet the definition of a financial product require an AFS licence. Specific exemptions apply to funeral directors who distribute funeral expenses policies issued by friendly societies.
So I need an AFS licence. What are my next steps?
The first step is assessing whether you have the competence within your organisation to be able to obtain an AFS licence. We can guide you through the AFSL requirements and assess whether you have the required responsible managers in your team. If not, we may be able to help you source these people through our professional network.
Our lawyers are experts in financial services licensing and AFSL application assistance, with over 20 years of experience in this niche field. Please download our Guide to Applying for an AFS licence to find out more, or call us for a no-obligation discussion about Australian Financial Services Licensing in the context of your business.
You will find more information about the AFS licensing process in our AFSL Application Guide. As always, it is a clever idea to go to the source and look at the information at https://asic.gov.au/for-finance-professionals/afs-licensees/.
Our AFSL Application Assistance Process
Our expert licensing lawyers will guide you through this process in an efficient and timely manner.
We can help you apply for an AFSL by:
- Providing a legal opinion on the authorisations you will need.
- Assessing your proposed responsible managers. Is their experience and knowledge sufficient?
- Recommending responsible managers from our network in the event your team does not hold the required experience to meet ASIC’s requirements.
- Prepare the proofs (supporting information) for lodgement with ASIC.
- Predict with a high degree of accuracy whether your application will be successful, and if not, advise you on any weaknesses in your application that should be rectified.
- Assist you with requisitions from ASIC.
AFSL applications can be complex and time consuming. Rely on our assured advice and decades of AFSL application experience to streamline the process. Contact us today for a no-obligation discussion about your business.