AFS Licensing

In response to a change in the Corporation Act Fyfe Corp developed a kit to enable financial services companies to prepare.

Financial Services Reform (FSR) is an amendment to the Corporations Act 2001 to provide:

Consistent regulation of similar products and markets
A single licensing regime
Minimum standards of conduct when dealing with clients

What are the key dates?

From 11th March 2002, a person carrying on a new financial services business must hold an Australian Financial Services (AFS) Licence. Current financial services providers will have up to 10th March 2004 to obtain an AFS Licence. In the interim transitional rules apply.

It is anticipated that most entities in the financial services industry will require a licence, however the Corporations Act does contain some exemptions (e.g. For representatives of licensees).

There are 5 main categories, which require an AFS licence:

Provide financial product advice
Deal in a financial product
Make a market for a financial product
Operate a registered scheme and
Provide a custodial or depository service

How do you apply for a licence?

Identify the financial services and products you currently provide or wish to provide
Understand your obligations under the Corporations Act and ASIC policy under an AFS licence
Ensure that you are able to meet these obligations

How long will it take?

This depends on the complexity of the business, although to ensure that there are no unnecessary delays ASIC advise:

Apply early, ensure the application is complete and use the on-line form
Understand the obligations by reading the material
Plan and prepare for transition early
Review the current licence to ensure that you currently comply

Examples of material setting out obligations and explaining them:

Corporations Act 2001

(as amended by the FSR Act and the Financial Services Reform (Consequential Provision) Act 2001 (by replacing chapters 7 and 8 with a new chapter 7);
AFS licensing kit;
Licensing and disclosure: Making the transition to the FSR regime - an ASIC guide (October 2001);
Licensing; The scope of the licensing regime: financial product advice and dealing - An ASIC guide (November 2001);
Financial advisors: What type of AFS licence authorisations and process do you need to apply for: an ASIC guide ver 1.(August 2001);
Relevant ASIC policy statements relating to FSR, including:
Policy statement 146 Licensing: Training of financial product advisers [PS 146] (Nov 2001)
Policy Statement 164 Licensing: Orgainsiaiton capacities [PS 164] (Nov 2001)
Policy Statement 165 Licensing: Internal and external dispute resolutions [PS 165] (November 2001)
Policy Statement 166 Licensing: financial requirements [PS 166] (Dec 2001)
Policy statement 167 Licensing: discretionary powers and transition [PS 167] (November 2001)
Policy statement 170 Prospective financial information [PS 170] (Sept 2002)

How are AFS licence applications processed?

There are 2 processes provided for under the legislation:

Legislative streamlining - where in certain circumstances applicants continue to provide the same services and products, and can provide necessary authorisations then ASIC will provide an AFS licence to continue these activities
ASIC licensing - where applications will be compared with the statutory criteria eg. For new licences or new products and services

What does the AFS licence look like?

The AFS licencee is in two parts: the first part is a single page designed to be framed containing:

Your name, ABN, AFS licence number and the date your licence takes effect;
The class(es) of financial product or particular financial service you are authorised to provide; and
The class(es) of financial product or particular financial products you are authorised to provide.

The second part contains all of the relevant AFS licence conditions that are not specified in the regulations.

FSR ("Financial Services Reform")

It is very difficult for independent firms to deal with this issue because they are ill equipped to do it alone. In addition, consulting firms (including legal firms) typically do not adopt a hands on approach, are expensive and the process is time consuming.

Proposed Solution

Our solution is the "Do It Yourself" Australian Financial Services ("AFS") Licence Kit. This is a cost effective, practical aid for getting licensed and has been created from our experience in implementing these changes within businesses we consult to (primarily independent financial advisors, brokers and accountants).

Kit Content

The kit will be delivered on CD Rom and cover:

Detailed checklist of critical information for you to assemble;
Convenient selection of relevant ASIC information for you to review;
Sample templates for adopting processes to comply (including proofs and compliance plans), for you to adapt to your business;
Assistance for you to set up and complete the ASIC online licence application; and
Step-by-step guide of recommended steps to work through the process to make your business comply, and then prepare the licence application.

Next Steps

Please Click Here, fill in the form and post together with a cheque to receive your kit and get started.