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ASIC takes action against AFSL holders who fail to lodge financial statements

Posted on September 8th, 2016 by Sophie Gerber in AFSL Compliance

typewriter-801921_1280Failure to lodge their statutory financial statements with the Australian Securities and Investments Commission (ASIC) has led to action being taken against Australian Financial Services Licence (AFSL) holders. AFSL holders are required to have their financial statements audited and submitted to ASIC by 30 October each year.

A failure to lodge these statements is a breach of AFSL conditions as well as the legal obligations for AFSL holders under the Corporations Act 2001 (Cth) (Corporations Act). If you lodge the financial statements late (even by one day) you need to lodge a breach report with ASIC in addition to submission of the FS70 and FS71, and keep a record of this breach on your internal breach registers.

In recent months ASIC has demonstrated how seriously they view failures to lodge financial statements, by suspending two AFSL holders and cancelling an another AFSL, due to their failure to comply.

In February 2016, ASIC suspended the AFSL of Traders4Traders Pty Ltd (Traders4Traders) for failing to comply with AFSL obligations. In particular, ASIC found that Traders4Traders had:

  • failed to lodge financial statements, auditor reports, and auditor opinions over consecutive years; and
  • failed to notify ASIC of this breach within 10 business days of becoming aware.

As noted by the Deputy Chair, Peter Kell, in an ASIC media release entitled “ASIC suspends AFS licence for failing to lodge financial statements” published in February 2016 a failure to lodge financial statements is indicative to ASIC that there is a poor compliance culture within the relevant company. As a result of this breach, ASIC has suspended Trader4Traders’ AFSL until 21 April 2016.

In March 2016, ASIC suspended the AFSL of Allegianz Pty Ltd (Allegianz) for a similar breach of AFSL reporting obligations. ASIC found in particular that Allegianz had:

  • failed to lodge financial statements, auditor reports, and auditor opinions over consecutive years; and
  • failed to notify ASIC of this breach within 10 business days of becoming aware.

As a result of this breach, ASIC has suspended Allegianz’s AFSL until 10 September 2016.

In May 2016, ASIC went a step further and cancelled the AFSL of Winley Insurance Group Pty Ltd (Winley) for a similar breach. In particular, ASIC found that WInley had:

  • failed to lodge financial statements, auditor reports, and auditor opinions over consecutive years, despite repeated demands from ASIC; and
  • failed to notify ASIC in writing of this breach within 10 business days of becoming aware.

As a result, ASIC has cancelled Winley’s AFSL and the investigation continuing.

These suspensions and cancellations of AFSLs are a good reminder of the importance of submitting financial documents on time to ensure no breaches occur, ASIC particularly noted that the annual lodgement of audited financial statements is “an important part of a licensee demonstrating it has adequate financial resources to provide the services covered by its licence”.

ASIC has stated that it will continue to contact any AFSL holder who does not lodge their audited financial statements on time and will take continue to take action as deemed appropriate. ASIC’s strong stance on the failing to lodge financial statements and subsequently a breach notification is part of ASIC’s ongoing efforts to improve standards across the financial services industry.