ASIC Exercises its Power to Refuse Australian Financial Services Licensing Relief

ASIC’s Report 654 details instances where ASIC exercised its power to both grant and refuse AFS licensing relief. Throughout the period between April 2019 and September 2019, ASIC received 708 applications for relief each of which were either approved, refused, withdrawn or decided upon outside of the noted period. Report 654 provides interesting insight into the motives behind ASIC’s decisions to grant or refuse relief.

Important Points from Report 654

ASIC provides examples of applications for relief which have been refused as a means of assisting prospective applicants in understanding how ASIC exercises its powers. 

The example was in relation to a proposed non-cash payment product (“NCP”) as follows:

  • Digital Payments – ASIC refused relief to an applicant seeking to provide a mobile application that enabled users of the application to make payments to the bank account of another user of the mobile application. The application proposed would provide instructions which would assist users in the transferring funds from one bank account to another. ASIC was not satisfied that the services the applicant intended to provide greatly differed from other financial services providers who operate existing payment platforms and are bound by the compliance and regulatory obligations specified in the Corporations Act 2001 (Cth) (“Corporations Act”). ASIC also considered that providing relief to the applicant would cause significant risk of loss for retail consumers as they would have the ability to transfer large sums of money, potentially incorrectly.

This example demonstrates that ASIC requires applicants requesting relief to maintain a comprehensive compliance framework under which they operate, particularly in relation to NCPs.

For further insight and to contrast the example above, ASIC details an example of an applicant that was granted relief:

  • Micro-investing Platform – ASIC approved relief from holding an AFSL to an applicant who sought to operate a mobile application for the purposes of micro-investing in exchange traded funds (“ETFs”). As the mobile application proposed to pool investor funds, the services to be offered were deemed to be a managed investment scheme (“MIS”). ASIC was of the opinion that the provisions relating MISs were not intended to apply to services like the operation of the mobile application. Additionally, the applicant proposed to provide users of the mobile application with detail disclosure documentation and policy documents.

Two major contributing factors of ASIC’s approval of this application was the applicant’s intention to provide users of the mobile application with a Financial Services Guide, and disclose the mobile application’s terms and conditions as well as the firm’s best execution policy. As a result, this applicant appeared to be operating under a satisfactory compliance framework.

Background Information

ASIC’s ability to grant relief from the requirement to obtain an AFSL has been extended to financial reports and audit, MISs, takeovers, fundraising, and financial services and markets. The ultimate purpose of Report 654 is to improve the level of transparency and the quality of information regarding ASIC’s decisions to exercise discretionary powers under the Corporations Act.

Further Reading

Prospective applicants of relief should ensure applications are complete and address all relevant issues under ASIC’s relief guidance. Prospective applicants should also ensure they read Report 654, released in February 2020, and its previous versions before preparing an application for relief to better understand ASIC’s principles for granting relief.

Sophie Grace can assist you in understanding the requirements of seeking relief from ASIC. Please contact us for further information.

About The Author

Sarah Murray

Sarah works with the Compliance Team with a particular focus on compliance and legal services. Sarah works with the Legal Team providing ongoing assistance in drafting and reviewing documentation as well as legal research. Sarah assists clients with AFSL and ACL applications, variations and also assists in the implementation of compliance reviews. She provides ongoing compliance support in the form of compliance program implementation and reviews.