Understanding the AFSL application process

Are you in the financial services industry? If so, you need an AFSL, otherwise you could be subject to fines and other penalties. Find out everything you need to know about the AFSL application process, including a rundown of which businesses need to apply for an AFSL licence, a review of the application process itself, and a summary of what ASIC’s AFSL application decisions are based on. But first off, what is an AFSL anyway?

What is an AFSL?

AFSL stands for Australian Finance Services (AFS) Licence. So, what is an AFSL? Essentially, all financial services businesses need an AFSL to operate in Australia. They’re issued by ASIC (Australian Securities and Investment Commission) and authorise a business to carry out a broad range of services, including:

• Provide financial product advice to their clients (i.e. you make recommendations to clients regarding which financial products they should buy or invest in)

• Operate a registered scheme (i.e. an investment fund)

• Offer a depository or custodial service (i.e. holding a financial product for a client)

• Create a market for financial products (i.e. you quote prices that customers can sell or buy financial products for)

• Deal in financial products (i.e. you buy or sell shares on behalf of your customers)

• Provide traditional trustee services (i.e. estate management)

So, if your business deals with any of the above services, you need to make an AFSL licence application. Also, you should be aware that the term “financial product” is used relatively broadly in this instance and covers a wide range of facilities via which customers make non-cash payments and financial investments or manage financial risk.

What happens if I need an AFSL licence and don’t have one?

AFSL compliance is treated very seriously by ASIC, so it’s vital to make an application for an AFSL as soon as possible. Breaches of AFSL compliance can lead to fines and penalties. In some cases, criminal charges have been brought against people who operate financial services businesses without an AFSL Australia licence.

Where do I apply for an AFSL licence?

Generally, you can apply for your AFSL licence online (also referred to as the eLicensing system. The application process is relatively simple as you can start, save, and resume the application as many times as you like before finalising and submitting it. It’s important to remember that all the information included in the application must be correct and the core proofs need to be lodged as soon as possible after you submit the application.

How can I prepare for the AFSL application?

To ensure you’re doing everything right, check the AFS Licensing Kit. If your AFSL application doesn’t meet ASIC’s requirements it could be refused, returned to you, or you may encounter serious delays while ASIC seeks further information from you about your business. So, it makes sense to get the application right the first time and include all the relevant information.

In addition, ASIC provides a sample application that you can explore to get a feel for the application process before you get started. This can be a great way to familiarise yourself with the system, although it’s important to note that the sample lists all possible questions/outcomes. Because ASIC’s eLicensing system tailors the application to your business, you won’t see all these questions when you make your AFSL application.

How does the AFSL application process work?

Once you’ve prepared for the AFSL application process and you’ve read through the AFS Licensing Kit, it’s time to make the application itself. Here’s a step-by-step guide to what you can expect to see when you make an application:

1. Part A – Applicant and AFS licence details: In this section, you provide your personal information, as well as information regarding the financial services you wish to receive authorisation for.

2. Part B – AFS licensee requirements: In this section, you must demonstrate that you meet the licence requirements with regards to organisational competence, compliance arrangements, representatives, adequate resources, dispute resolution, risk management, and insurance/compensation.

3. Part C - Specific questions for certain selected complex services and/or products: In this section, you need to answer specific questions about the financial services you’re requesting authorisation for.

4. Part D – Declarations and Certifications: In this section, you must make a number of declarations/certifications regarding information you have provided in the application.

5. Part E – Proofs: In this section, you provide core proofs as evidence to support your AFSL application.

What determines whether a business receives an AFSL?

ASIC bases their decision regarding AFSL applications on a couple of different factors. They’ll check whether your business is competent enough to carry out the financial services you’ve detailed in your AFSL Australia application, whether your business has sufficient financial resources to carry out these services, and whether you can meet all the other AFSL licence obligations regarding insurance, training, compliance, dispute resolution, and so on.

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