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Holding an inactive AFSL or ACL? ASIC has the Power to Immediately Cancel it

In recent months, ASIC has cancelled a number of Australian Financial Services Licences (AFSL) due to inactivity. ASIC can provide written notice to licensees who fail to provide services authorised by the licence within six months of it being granted, or if an ongoing licensee simply ceases to carry on their financial services business.

ASIC has the power to cancel an AFSL or Credit Licence without a hearing in these scenarios.


Relevant Provisions of the Corporations Act

Relevant Provisions of the National Consumer Credit Protection Act

The licensee has not commenced its business within six (6) months of being granted an AFSL or ACL

Body corporate Licensees: s915B(3A)

This power also applies to licensees which are partnerships, individuals and trustees.

Section 54(1A)

The licensee has ceased to operate a financial services or credit business

Body corporate Licensees: s915B(3)(a)

This power also applies to licensees which are partnerships, individuals and trustees.

Section 54(1)(b)


Recent ASIC Enforcement Action


What’s next?


Existing Licensees

Given ASIC’s recent enforcement action in this space, existing licensees should ensure they are actively using all the authorisations on their licence or are ready to do so within six months of receiving their licence.


Prospective Licensees

Those seeking to apply for an AFSL or Credit Licence should ensure:

  • A clear business plan is in place which outlines the specific operations of the proposed business;
  • Future plans for the operations of the business have been considered, including the timing for those plans;
  • Appropriate human, financial and technological resources are in place (or can be in place prior to the submission of a licence application);
  • Any technology, including websites, applications or platforms which are required to provide the financial services under the AFSL or Australian Credit Licence are being developed and will be finalised and ready to launch within six (6) months of the licence being granted.


Seeking an Extension?

Licence holders can 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 Credit Licence. 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 Credit Licence 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:


Background Information

ASIC’s power in respect of requiring business activity to commence within six months 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 Credit Licence 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 Credit Licence.


Further Reading


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.

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