Prior to submitting a license application, you should be aware of:
- For what reason are you applying? "Branding" is insufficient on its own. You must persuade ASIC that you require a license. If your suggested model is not a typical combination of business operations, you might need to see a lawyer.
- Which kinds of license authorizations are required? Three categories of authorizations exist:
- Financial products, such as securities, managed investment plans, and derivatives
- Financial services (such as trading, market-making, advice, custodial services, equity crowd funding, traditional trustee services, and running a registered scheme)
- Sorts of clients (retail, wholesale, or both).
3. Who is going to:
- possess the license. A business? A trustee? A collaboration? A trustee company partnership? No issues. Just be your designated Responsible Managers and make sure everything is clear before you start.
#A responsible manager: what is it?
The phrase "responsible manager" may have been used occasionally, but you may be wondering, "Who exactly are they, and what exactly is their role?"
For the vast majority of applicants, the most significant challenge in the AFSL application process is locating suitable Responsible Managers for their company. How do you determine who your Responsible Managers should be? is one of the most often asked questions. What do they have to do? How do they relate to the AFSL application and, eventually, to the AFSL? You should be asking all of these questions since the answers to them are fundamental to the AFSL regime.
A Responsible Manager is essentially a crucial person in a company that ASIC considers to make sure the licensee is "competent" to offer its financial services.
Directors of the licensee are not required to be responsible managers. They may work as contractors or as employees. If they are a contractor, it would be wise for their obligations to be backed by a thorough contract.
The designated Responsible Manager may not be the one delivering the services in larger organizations, but they will be in charge of overseeing others who do.
The kind, size, and complexity of a business will determine how many people are nominated as Responsible Managers.
The responsibility of a responsible manager is to be competent. In general, responsible managers will supervise and control the delivery of financial services.
Despite popular assumption, their designation as Responsible Managers does not make them legally "responsible" for anything that occurs. According to an employment contract, they are accountable to their employer. Additionally, if they also fit the Corporations Act's description of an officer or director, they will mostly be held personally accountable for specific actions.
Additionally, ASIC anticipates that Responsible Managers will actively contribute to the industry's compliance culture by being cognizant of and supportive of the company's compliance arrangements.
ASIC requires a Responsible Manager to fulfill one of five requirements outlined in ASIC Regulatory Guide 105 (Licensing: Organisational Competence) in order to determine if the manager possesses the necessary knowledge and expertise. To put it briefly, this implies that they must have three of the last five years of experience in providing the services for which they are being nominated, as well as an undergraduate or graduate degree pertinent to the financial services they are in charge of.
#How can I apply for an AFS license?
The ASIC Regulatory Portal offers the AFS Licence application, which is fully online and requires the submission of applicant and proposal authorization information. The applicant must certify that they are prepared to start operations and have the necessary systems and procedures in place. Occasionally, the applicant must also explain specific compliance procedures or methods. When requests for more complicated license authorisations are made, applicants are expected to outline some compliance and risk management practices that are pertinent to those requests.
Along with the application, some supporting documents concerning the licensee and important persons (the responsible manager or managers) must be prepared. The next sections go into further detail about the supporting documentation and Responsible Managers, which merit additional discussion.
#How can one apply for an AFSL?
You must be absolutely certain that the authorizations you will be requesting on your AFSL cover all of the business activities before you even consider beginning the application process.
In order to prove that your business is capable of offering certain financial services under an AFSL, your AFSL application will also need appropriate Responsible Managers who can show that they possess the necessary degree of expertise and experience in the authorizations asked on the AFSL.
You might be prepared to start the AFSL application procedure if you have all of the aforementioned. But the difficult part is far from over!
As previously stated, you will be asked to describe your proposed firm as well as some of your compliance and risk management practices in the online application.
Together with the experience of the designated Responsible Managers, you must compile this information and answer the application's questions.
This comprises the following:
- An outline of the suggested business: This is a comprehensive summary of your company that includes the kinds of financial services and products you will offer, your projected growth, the risks that come with expansion, your revenue streams, the kinds of clients you typically serve, the locations and methods of service delivery, and your organizational chart.
TIP: The online form allows you to submit an organizational chart and, if needed, a thorough transaction example to further illustrate the suggested business model, which could make ASIC's evaluation simpler.
- Overview of Experience of Responsible Manager or Managers: Each of your designated responsible managers' pertinent knowledge, experience, and abilities must be listed on the form.
- Documents of Support for Every Responsible Manager: These records, which attest to each Responsible Manager's competency, consist of:
- copies of qualifications,
- a statement of personal information (with language accepting nomination as responsible manager),
- a copy of a national criminal history check that is also less than a year old, and copies of foreign criminal history checks and bankruptcy checks that are also less than a year old, if applicable.
- Fit and Correct Examination of Controllers and Applicants: Every suitable individual must supply the following:
- a declaration of personal data;
- copy of a national criminal history check that is also less than a year old;
- if required, a copy of an international criminal history check and a bankruptcy check that is also less than a year old.
The following are examples of fit and decent people:
- Directors, secretaries, and senior managers of the licence application and its controlling entity (or, in the event of several controllers, entities);
- those in charge of the applicant; and
- responsible managers.
A signed Declaration must be included with these documents.
TIP: Since part of this information will prepopulate the online application, make sure your records on the Directors and Secretaries of the Applicant and the Controller match ASIC's registers.
- Additional details: You could be required to explain your compliance and risk management practices in connection with the authorizations that are being requested. You may occasionally be able to upload a submission that covers these processes and includes transaction samples.
As you answer questions, ASIC's online application procedure is updated continuously. Keep in mind that a lot of inquiries ask you to describe a specific process or inquire if systems, records, or procedures are in place. A sample of the online AFSL application is available, and it contains a list of all the questions that could be asked.
After submitting your AFSL application and supporting documentation electronically, you should allow approximately five to eight months for the process to be completed. Applications that are more complicated take longer.
You might be asked to submit further information as part of the evaluation process. These requests typically take the shape of additional inquiries from an ASIC analyst who wants to learn more about your company's operations, procedures, activities, etc.
Other items you should consider obtaining before receiving a final AFSL include, but are not limited to:
- Financial statements and cash flow forecasts.
- Professional indemnity insurance and the necessity to improve the applicant's financial situation in order to satisfy the financial requirements may fall under this category.
Additional noteworthy items to include on your list are:
- Maintaining the sufficiency of your financial, technological, and human resources;
- Ensuring that your disclosure documents, if necessary, are correct, current, and compliant; and
- Having processes and procedures in place for compliance, managing conflicts of interest, risk management, and the training and competence of your representatives and authorized representatives.
#What happens if I apply for both an APRA and an AFSL license?
It is crucial to give yourself plenty of time to obtain the required approvals from APRA, ASIC, AUSTRAC, and the RBA if you plan to be licensed by APRA as an insurer, superannuation entity, bank, or restricted bank. A number of pre-application documents must be submitted as part of the lengthy APRA licensing process, which is followed by the comprehensive license application. You must simultaneously prepare your application for an AFS license and any necessary supporting documentation.
Prior to moving forward, you must
Make threshold issues clear: Before moving on, it is necessary to clarify the threshold issues that were previously discussed. If you don't do this at first, ASIC will ask you to address these concerns later on in the evaluation process, after you've invested time and funds to get there. ASIC will evaluate each application on its own basis regarding:
- if you truly need the license for what you intend to perform;
- whether you are requesting the appropriate authorizations; whether you or the other suggested Responsible Managers possess the necessary competency; and
- whether there are any other matters that call for more investigation.
#Think about the price:
How much do you think your time is worth? You will need to weigh the expense of hiring a third party to complete the application against the time and expense of doing it yourself.
If you do it yourself, you'll need the time and resources to start from scratch and make sure you have a thorough checklist to make sure you don't overlook anything during the application process. The requirements of your proposed licence conditions, the Corporations Act and Regulations, ASIC's RG 104, and roughly six other regulatory guides, in addition to the Australian or International Standards that are frequently mentioned (this varies if you're only going to have wholesale clients), must all be met by your business procedures.
You will still be participating in the process even if you choose to outsource it. To save some money, you could even choose to outsource some of the work and do some of it yourself. As an alternative, you can choose to begin the procedure on your own and ask a licensing service provider for help in reviewing your paperwork before sending the application to ASIC.
When faced with the time and expenses associated with submitting an AFSL application, some prospective applicants determine that it is not feasible to move forward as intended and consider their other options, such as serving as a licensee's authorized representative. This is especially true for organizations with one or two employees.
Ultimately, it is up to you to weigh the benefits and drawbacks of getting your own license and decide which route is best for your company.
