AFSL application success rate
We have lodged over 100 AFSL applications and have a 100% success rate.
We put this down to 2 key factors.
The first relates to our expertise and deep knowledge of the AFSL application process, ASIC’s requirements and preferences.
The second is that we stress-test each AFSL application to determine its prospects of success before submitting with ASIC, and where required, recommend improvements to increase the likelihood of approval. This may include changes to the responsible managers proposed or providing additional detail on the financial services to be provided and addressing any regulatory concerns ASIC may have in relation to those activities.
Do you need an AFSL?
The general test is that you need an AFSL if you carry on a financial services business.
The first step is determining whether you are providing a financial service. The most common financial services are:
- providing financial advice (personal or general) on a financial product
- dealing in a financial product (issuing a product or dealing in it on behalf of another)
- providing a custodial service (i.e. holding a product on behalf of clients)
- operating a crowd-funding platform
- operating a registered managed investment scheme
Financial services are only provided in relation to financial products.
What is a financial product? A financial product includes shares, options, superannuation products (including SMSFs), insurance products, units in a unit trust, derivatives and foreign exchange products.
What isn’t a financial product? Direct real property and bullion are not financial products and can be held and dealt with without an AFSL. However these assets are often purchased or funded in ways which renders the underlying structure a financial product (i.e. through a unit trust).
If you are providing financial services in respect of financial products, the next step requires an analysis of the financial services provided and whether they are exempt from the AFSL regime.
If you are providing a financial service which is not exempt, then you need an AFSL to engage in that activity. Depending on the financial services provided, you may alternatively be able to provide the activity as an authorised representative of another AFSL holder instead of holding your own AFSL.
Pros and cons of holding an AFSL vs Authorised Representative
In most cases, you have the option of holding your own AFSL or becoming an Authorised Representative of another AFSL holder.
Is holding an AFSL better than being an Authorised Representative? The answer – it ultimately depends as there are pros and cons of each option.
Holding an AFSL
- The AFSL holder has ultimate flexibility on all aspects of the business and is not subject to any restrictions or approval requirements that may apply to an Authorised Representative.
- The AFSL holder is subject to a higher compliance burden given it is ultimately responsible for complying with the AFSL regime.
- Obtaining an AFSL takes approximately 6 months. If getting to market as soon as possible is a priority, then becoming an Authorised Representative may be preferable given no regulatory approvals are required.
Becoming an AR
- An Authorised Representative is subject to the directions and restrictions of the AFSL holder. These restrictions are defined in the AR Agreement, but can extend to both significant matters (i.e. ownership of clients, engaging third parties, business practices) as well as day-to-day activities (i.e. marketing material, billing clients, appointing representatives) which require the AFSL holder’s approval.
- An Authorised Representative is usually subject to a reduced compliance load given they follow the policies and procedures which are prescribed by the AFSL holder.
- An AR fee is payable for being an Authorised Representative. This is usually a fixed fee, but can vary and be pegged to other benchmarks such as funds under management or asset management fees.
How much does an AFSL cost?
Legal costs to prepare the AFSL application vary depending on the financial services sought. Legal fees usually range from $10,000 – $30,000.
ASIC charge a fee to assess the AFSL application. The fee charged depends on the authorisations required. However, the fees typically range from $2,500 – $7,500.
How long does it take to get an AFSL?
The standard time frame is 6 months from the date the AFSL application is lodged with ASIC. However, more complicated business models (such as crypto or fintech) will usually take longer to assess so we advise clients to lodge the AFSL application as soon as possible.
What is a responsible manager?
A responsible manager is an individual who is responsible for the financial services provided by an AFSL holder.
Not everyone can qualify as a responsible manager. They must meet certain education standards and have practical experience in providing the financial services which are sought by the business.
For example – a financial planner would have experience in providing personal advice on certain products, but would not have experience in operating a wholesale property fund.
How many responsible managers are required?
There is no limit on the number. However, at a minimum, an AFSL holder must have enough responsible managers:
- who collectively have sufficient experience in each financial service sought by the business; and
- who collectively can supervise the financial services undertaken by the AFSL holder. The size, complexity and nature of the business (i.e. whether it operates from multiple locations) should be considered when determining how many responsible managers are required.
Does a responsible manager have to be an employee?
Responsible managers can be external consultants. However, they must have the time capacity to appropriately supervise activities undertaken by the licensee and the appropriate authority to make decisions in respect of the financial services provided.
When is a responsible manager liable?
A responsible manager (RM) is not personally liable for any compliance or regulatory breaches that are committed by the AFSL holder. However ASIC has the power to impose banning orders on the responsible manager where he/she has materially failed to comply the obligations that apply to responsible managers. A banning order may be limited to a ban on providing financial services or from managing any financial services business. Such bans may be for life or a period of time.
What is the AFSL application process?
An AFSL application often represents a defining moment for a business which either needs an AFSL to commence operations or scale beyond what is currently possible under an authorised representative arrangement.
Applicants only have 1 chance to get an AFSL application right. Getting it wrong (or not in the form preferred by ASIC) will usually result in the application being rejected or its assessment delayed.
There are 3 key steps which are critical to maximising the chances of an AFSL application being approved. We have set these out below.
1. AFSL Authorisations
A business is permitted to provide the types of financial services covered by the authorisations contained in its AFSL. The type of AFSL authorisations required will differ for each company and depends on the activities and operations of the business. This requires a consideration of:
- the type of financial products the business will work with.
- the type of financial services the business will provide to clients (i.e. advice, dealing, custody).
- whether the financial service will be provided to retail or wholesale clients.
We advise clients on the authorisations required to operate their business and whether any amendments to the business are required to avoid or mitigate any additional legal and compliance obligations that would otherwise arise.
2. Choosing Responsible Managers
An applicant must nominate at least 1 Responsible Manager when submitting an AFSL application. A Responsible Manager is responsible for the financial services provided by the AFSL holder and must have appropriate skills and experience in the authorisations sought in the AFSL application.
For example – the Responsible Manager would need to have appropriate experience in both the financial service and underlying financial products that comprise the authorisations sought under the AFSL application.
We vet Responsible Managers to determine whether they are appropriate and will be accepted by ASIC and have a large network of ‘RMs for hire’ who provide their services to companies on a consultancy basis.
3. Draft AFSL Application Proofs
In addition to the AFSL Application Form (FS01), applicants are required to submit ‘core proof’ documents which are the documents that ASIC considers as part of its assessment of whether to grant an AFSL.
The core proof documents required will depend on the AFSL authorisations sought. However the following core proof documents will need to be prepared at a minimum:
- Business Description Proof (A5), which sets out details of the proposed business.
- Organisational Competence Proof (B1), which sets out each Responsible Manager’s skills and experience and highlights how they are relevant to the authorisations sought.
- Financial Resources Proof (B5), which documents the financial position and performance of the business and evidences how it satisfies the financial resource requirements that apply to the applicant.
We prepare core and additional proofs to ensure they are in the form preferred by ASIC and maximise the chances of obtaining an AFSL in the shortest period of time.