ASIC has been granted new powers to cancel both Australian Financial Services Licences (AFSL) and Australian Credit Licences (ACL) if the licensee fails to commence its business within six months of the licence being granted by ASIC. This also applies to existing AFSL and ACL holders who do not carry on business within six months of 18 February 2020.
ASIC has the ability to immediately cancel an AFSL or ACL where the licensee:
- has not commenced its business within six (6)
- being granted an AFSL or ACL;
- 18 February 2020 (for existing AFSL or ACL holders); or
- has ceased to operate a financial services or credit business.
What are licensees required to do?
If you are a body corporate, ASIC may cancel your AFSL or ACL by giving written notice if you have not provided financial or credit services as authorised under the licence within six months of it being granted.
This new power also applies to the following:
- Individuals – Corporations Act 2001 (Cth) s915B(1)
- Partnerships – Corporations Act 2001 (Cth) s915B(2A)
- Trustee of a trust – Corporations Act 2001 (Cth) s915B(4A)
Licence holders will be able to seek an extension of time from ASIC if they are unable to commence their financial or credit business during the six month period after being granted their AFSL or ACL. This extension should be sought before the expiry of the initial six month timeframe. It is at ASIC’s discretion to cancel a licence and ASIC may work with licensees if there are genuine reasons for not commencing business six months after being granted a licence.
Failed to commence business within the six month period?
Licensees must notify ASIC of a failure to commence providing products and services authorised under the relevant licence within fifteen business days following the conclusion of the six month period. This is a requirement under section 912DB of the Corporations Act and section 53B of the Credit Act.
ASIC does not expect licensees who are providing some, but not all, of the products or services authorised under its licence to lodge a notification.
How to notify ASIC?
AFSL and ACL holders are required to lodge a written notification with ASIC in the form of a letter. The letter must include the following information:
- a statement that the licensee has, or will have, failed to commence a financial services business/credit business within the required timeframes;
- the reasons why the licensee has not commenced operating its business;
- the date by which the licensee expects to commence operating its business;
- a statement about any changes to the products and services the licensee intends to provide under the licence since the licence was granted (if any); and
- a statement about how the licensee will continue to satisfy the general obligations of a licensee.
The notification can be emailed to the following ASIC contacts:
This new power came into effect in February 2020 after public comment made in response to the ASIC Enforcement Review Taskforce Report (Taskforce Report) in 2017.
Previously, ASIC’s powers in the AFSL and ACL regime only allowed ASIC to suspend or cancel licences if the licensee ceased to commence a financial service business. These powers did not include the ability to suspend or cancel licences in the event that licensees were not providing financial services as authorised after the granting of a licence. The recommendations by the Taskforce Report were made in response to uncertainty as to when a business should commence operation after obtaining a licence. The need to strengthen these powers was also imperative as licensees were capitalising on licenses and selling them to persons who may not have met the requirements to hold an AFSL or ACL.
- Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators (2019 Measures)) Act 2020
If you would like to speak to us about how this amendment could affect your licence or require guidance on lodging a notification with ASIC, please contact us.