Unfortunately, the hard work does not stop after you complete your AFSL application. If you want to keep the AFSL you’ve just worked so hard to obtain, there are strict AFSL requirements you must abide by.
So go ahead and pop those champagne corks to celebrate getting your AFSL —it’s a big moment! But then turn your focus to the future and ensure that you have rock-solid AFS compliance and reporting measures in place.
If you are in any doubt whatsoever about current compliance with your AFS licensee obligations, please contact us for no-obligation AFSL legal advice.
Understand Your AFS Licensee Obligations
The overarching obligation of AFSL holders is to ensure that all Australian Financial Services Licensees provide ‘efficient, honest and fair financial services’, and comply with the conditions set out by ASIC.
Sounds reasonable. But what does this actually mean in practice? Let’s run through some of the general AFSL obligations you are held to as an AFS Licensee, as well as what might happen if you run afoul of ASIC’s AFSL requirements.
Please note that this list is not exhaustive and does not constitute legal advice. Please contact us with your specific business situation for tailored AFSL legal advice.
The general obligations of AFS Licence holders are:
- You provide efficient, honest, and fair financial services.
- You have sufficient arrangements in place to manage conflicts of interest.
- You comply with all financial services laws.
- Your representatives comply with all financial services laws.
- You comply with all conditions on your AFS licence.
- You comply with ASIC’s reference checking and information-sharing protocol.
- You have adequate financial, technological and human resources to provide the services covered by your licence, and to carry out supervisory arrangements.
- Your representatives are competent and adequately trained.
- You maintain the necessary competence to provide financial services.
- You have a dispute resolution system which includes being a member of an external ASIC-approved scheme (if you have retail clients)
- You have adequate risk management systems in place.
- You maintain appropriate professional indemnity insurance.
- You appoint an ASIC-approved auditor.
- You maintain minimum financial obligations such as having sufficient cash flow.
Tell ASIC: Your AFSL Reporting Obligations
To remain compliant, you must notify ASIC of any administrative changes to your AFS licence, including when:
- Your business details change, such as a change of responsible manager AFSL, or a change to your business address or contact details.
- You appoint or cease an authorised representative or financial advisor, or their details change.
- You appoint an auditor.
- You change control of the AFS licensee.
Additionally, you must inform ASIC when your financial advisors comply (or fail to comply) with the professional standards for financial advisors, which include holding approved qualifications, passing a financial advisor exam, participating in CPD, and complying with a code of ethics.
Reportable Situations (Previously Breach Reports)
You must notify ASIC of all reportable situations via the ASIC Regulatory Portal within 30 calendar days of being made aware that a reportable situation has/may have arisen.
Reportable Situations include:
- Significant or likely significant breaches of core obligations.
- Any investigations being made into potential breaches where the investigation continues for more than 30 days.
- Any outcomes of those investigations of potential breaches.
- Conduct that constitutes gross negligence or serious fraud.
- Reportable situations about other licensees.
What happens if you do not remain AFS compliant?
ASIC is a strict taskmaster. If it has any suspicion that you are not keeping up with the conditions of your AFS licence, ASIC will take steps to suspend or cancel your AFSL or impose additional conditions on your AFS licence.
After all the work that goes into a successful AFSL application, we strongly recommend you do not let this happen! CNM Legal has 20 years of AFSL experience and a deep knowledge of AFSL requirements and obligations, so please call us for expert AFSL legal advice if you have any doubts about your compliance.
We also specialise in AFSL variations. If you need to vary your AFSL to reflect changes in your business in order to remain compliant, such as changing your responsible manager AFSL with a key person condition or changing the nature of the financial services you provide, please contact us for AFSL application assistance.
As you graduate from the AFSL application stage through to maintaining your AFS Licence for the long term, it’s vitally important that you remain vigilant about meeting your AFSL obligations. If in doubt, please contact us for assured AFSL legal advice.