Sophie Grace works with numerous business types in the financial markets industry including, fund managers, financial planners and brokers, to help them obtain their own Australian Financial Services Licence (AFSL).
Applying to obtain or vary an AFSL can be a daunting and time-consuming task. Sophie Grace offers solutions to simplify the AFSL application process.
The basic steps you need to follow when obtaining an AFSL are:
1. Determine which authorisations you need
It is crucial that you obtain the appropriate authorisations to operate your new financial services business. As a starting point, the following questions should be considered:
- What financial products will your business be working with?
- Will you be dealing or providing advice in these financial products?
- Will this service be provided to retail or wholesale clients, or both? Click here for further information on the distinction between retail and wholesale clients.
- Will you be making a market in a financial product?
- Will you be operating a registered scheme?
- Will you be providing a custodial or depository service?
- Will you be providing a claims handling or settling service?
- Will you be the trustee of the fund or will you outsource this function?
- What assets will the fund invest in and are they financial products?
- Will the assets of the fund require insurance?
- Will you be the custodian of the fund assets or will you outsource this function?
- Does the fund need to be registered? Click here for further information on registered funds.
- Do you meet the Financial Adviser Educational Standards? Click here for further information of the current standards.
- Will you provide services in relation to margin loans?
- Will you be offering managed accounts (including MAMMs or PAMMs) or copy trading services?
- Will you be offering binary options?
- Are you a market maker or an introducing broker only?
Sophie Grace will ask you these questions and more to ensure you seek and obtain the appropriate authorisations needed to operate your business. Financial product and service delineations and boundaries are complex and it is easy to overlook or inaccurately define an aspect of your activities. There are serious penalties and repercussions for operating without an AFSL or without the correct authorisations.
Read more about the types of financial products and financial services which are covered by the AFSL regime.
2. Choose your Responsible Managers
You must ensure that the Responsible Managers (RMs) nominated in your application have the appropriate skills and experience to demonstrate organisational competence in each of the authorisations that your business is seeking.
Generally, ASIC requires RMs to have:
- 3 of the last 5 years’ experience or 5 of the last 8 years’ experience providing financial services under an AFSL with similar authorisations; and
- tertiary level qualification such as an Advanced Diploma in Financial Services or a Bachelor’s Degree in either Business, Commerce, Economics or Finance. For any retail advice authorisations, RMs must have either an RG146 qualification (general advice) or meeting the Financial Adviser Education Standards (personal advice).
Read more about the Responsible Manager requirements.
Sophie Grace can assist to assess whether your RMs meet ASIC’s stringent requirements. Alternatively, we can put you in touch with candidates who will satisfy the requirements for the business you are seeking to operate.
3. Draft your Documents for ASIC
The documents submitted to ASIC for your AFSL application are known as ‘Proof Documents’. There are two types of proof documents, ‘Core Proofs’ and ‘Additional Proofs’. Core Proofs are the initial set of documents which go to ASIC. Sophie Grace will work closely with you to prepare the following proof documentation to meet the requirements of your ASIC AFSL application:
- Business Description (A5);
- People proofs for each nominated Responsible Manager – including police check, bankruptcy check, business references and qualifications;
- Background checks for all fit and proper people, including directors, secretaries, senior managers, controlling shareholders and officeholders of the controller (where the controller is a body corporate);
- Organisational Expertise Table (B1); and
- Financial Resources Statements (B5).
Depending on your business you may also be required to provide the following documentation:
- specific details of the assets the fund will invest in;
- the details of your external custodian and a copy of the executed custody agreement;
- a copy of the Compliance Plan and Product Disclosure Statement for the scheme which has been registered with ASIC (registered scheme applications only);
- additional proof documentation (and appropriate capitalisation details) where custodial services are provided.
- specific details of your margin lending activities, including procedures to gather information from the client, the products which form the basis of the margin loan and minimum loan to value ratio;
- the details of your Professional Indemnity Insurance including a statement regarding any exclusions;
- evidence that the RMs have provided advice in relation to all products requested on the application and specific detail regarding the type of advice and how many clients RMs have dealt with;
- additional proofs in relation to the training and monitoring of representatives.
- details of the counterparty or liquidity providers (e.g. AFSL details, agreements negotiated to date);
- any guarantees on stop losses you will provide to clients; and
- whether a Straight Through Processing (STP) operating model will be in place for the products;
- additional proofs in relation to derivatives and foreign exchange capacity.
4. Additional Proof Documentation
Depending on the authorisations for which your business is seeking to get an AFSL, ASIC will require the submission of additional proof documentation. Sophie Grace will prepare these documents for you and liaise with ASIC on your behalf.
- Development Program for Responsible Managers
- Compliance Arrangements
- Outsourcing Statement
- Conflicts of Interest Arrangements
- Program for monitoring, supervision and training of Representatives
- Human Resources Capacity Statement
- Dispute Resolution System Statement
- Risk Management System Statement
- Derivatives Statement
- Foreign Exchange Operating Statement
- Operate a custodial or deposit service
- Scheme Operating Capacity Statement
- Scheme Property Statement
- Market Maker Statement
- MDA Operator Capacity Statement
- Insurance Claims Handling and Settling Service Statement
- Cash Settlement Fact Sheet
How does ASIC assess an AFSL application?
- Initial Lodgement: an ASIC analyst is appointed and an initial review of your application documents is completed to ensure that all required documentation has been received by ASIC.
- Requisitions: The analyst then commences their assessment and makes requisitions for further information or documentation.
- Draft AFSL Provided: Where ASIC is minded to grant an AFSL, you will be provided with a draft AFSL, along with any final requisitions. It’s important you review the draft AFSL carefully, as it reflects the final AFSL ASIC intends on granting.
- Grant of Final AFSL: Once all final requisitions are responded to, ASIC will grant the final AFSL.
5. Ongoing Procedural Documentation and what’s next
The ongoing compliance obligations of your new or varied AFSL will require procedural documentation. Refer to our page on AFSL Procedural Documentation for more information.
There are four ASIC portals that you will need to access:
- AFSL Licensee Portal: All Licensees must register for online access via the AFS Licensee portal. This portal allows you to make changes in relation to your AFSL, including changes to your address, Responsible Managers, authorisations and auditor. You should ensure that your contact details are up to date so all correspondence from ASIC is received by the appropriate person.
- ASIC Connect: The ASIC Connect portal allows you to appoint Authorised Representatives and Financial Advisers to your AFSL. You can also add a Business Name/ABN via the ASIC Connect portal.
- ASIC Regulatory Portal: A range of regulatory services can be accessed through the ASIC Regulatory Portal. Lodgements in relation to breaches, ASIC industry funding metrics and client money reporting is completed via this portal.
- Companies Portal: this portal allows officeholders, or their agents, to make changes to the company details, including changes to the address, officeholders, shareholders and share structure.
Appointing an Auditor
ASIC requires AFSL holders to appoint an auditor within 1 month of the AFSL being granted. Form FS06 must be submitted to ASIC within 14 days of appointing an auditor.
Enrol with AUSTRAC
Any entity that provides designated services must be enrolled with AUSTRAC within 28 days of commencing operation. Enrolment forms can be completed via AUSTRAC Online.
Appoint Authorised Representatives/Financial Advisers
AFSL holders are required to notify ASIC of the appointment of any Authorised Representative or Financial Advisers within 30 days of the appointment via the ASIC Connect portal. Any changes to Authorised Representative/Financial Adviser details are also required to be notified to ASIC within 30 days.
Establish Compliance Procedures
Commence operations – Provide services within 6 months
AFSL holders must commence their financial services business within 6 months of receiving their final AFSL. ASIC has the power to cancel an AFSL if the licensee fails to commence its business within this timeframe. AFSL holders can request an extension of time from ASIC if there are genuine reasons to do so.
If you would like to obtain further information or assistance, please contact Sophie Grace directly.