Existing AFSL and ACL holders should be aware of changes to the licensing regime even if they do not intend to make a variation or new application in the near future.
Changes to the licensing regime are reflective of ASIC’s shifting focus on different aspects of the regime, whether it be a more scrutinisation of a particular sector of the financial services industry or the way in which ASIC considers the competence of Responsible Managers (RMs). In this article we explore the changes which particularly affect RMs.
Over time, ASIC has increased the scrutiny it places on licence applications including variation applications. Licence holders which have held their licences for some time will need to be prepared for an increased amount of documentation to be provided with the application and an increased number of requisitions from ASIC.
The application process has changed significantly since it was first introduced. Increased scrutiny has particularly been placed on the competence of RMs. ASIC is increasingly asking questions as to how RMs will manage duties across different entities (if applicable) including requesting a tabulated breakdown of the duties and time to be spent at each entity as well as requesting detailed information regarding conflicts of interest procedures.
Fit and Proper Person Test
The Fit and Proper People test is applied to all existing licence holders looking to vary their current licence regardless of whether the business is an ACL or AFSL holder. ASIC does not only consider whether Directors, Secretaries and other Senior Managers (including RMs) are Fit and Proper but also looks at any existing licence holders’ controllers. Applicants looking to vary their licence now have to provide police and bankruptcy checks for each of the aforementioned as well as a Statement of Personal Information, at a minimum. Read our previous blog article on this topic.
It is important to note that the expansion of the Fit and Proper Person Test also gives ASIC expanded powers to suspend or cancel a licence where ASIC is of the belief that the Fit and Proper Person Test is not being complied with by a licensee. ASIC also has the power to refuse variation applications where requested information regarding Fit and Proper persons is not provided.
Up to Date Information
As most licensees are aware, ASIC has long pushed the notion that providing misleading or deceptive information to ASIC is an offence. This notion also applies to the ongoing requirement to provide ASIC with up to date information including in relation to RMs. This may seem like a trivial update, however, when undergoing a licence variation, should ASIC consider information regarding the licence holder is inconsistent, ASIC may form the view the licence holder does not have adequate compliance arrangements in place to maintain and comply with the obligations attached to the licence. If ASIC forms such a view, the licensee may be subject to disciplinary action.
Read our previous blog article on why RMs should ensure their details with ASIC are up to date.
The timeframes it takes ASIC to assess licence applicants has increased substantially over the years. This can come as a shock to existing licence holders and applicants from overseas. ASIC’s indicative timeframes are included in its Service Charter and are as follows:
- Decisions made on 70% of licence applications within 60 days to 150 days after submission of the application; and
- Decisions made on 90% of licence applications within 240 days.
These extended timeframes prove to be particularly problematic for newly appointed RMs. Although ASIC considers a RM’s appointment date to be that of when the relevant application documentation was submitted rather than the date the application was approved, issues arise where ASIC has concerns with a RM’s organisational competency or does not approve the RM’s appointment. Where ASIC considers the RM does not have sufficient competency or refuses the RM appointment, licence holders can potentially be in breach of their organisational competency obligations because of the time that has elapsed. Existing licence holders should ensure that the licence has a sufficient number of RMs to maintain its organisational competency throughout a variation application and try to eliminate circumstances where a complete change in RMs occurs (i.e. try to ensure there is always a transition period between existing and new RMs).
If you would like to discuss any of the changes to ASIC’s licensing regime outlined above or would like assistance with varying your AFSL or ACL, please contact us.