How Do I Get an Australian Financial Services Licence? Your Complete Guide

Introduction

Obtaining an Australian Financial Services Licence (AFSL) is a crucial step for businesses seeking to provide financial services in Australia. The AFSL application process, overseen by the Australian Securities and Investments Commission (ASIC), ensures that financial service providers meet stringent standards of competence, financial resources, and compliance. However, it is important for businesses to carefully consider the obligations and responsibilities that come with being an authorised representative, as they will still be required to adhere to the same standards set by ASIC.

Navigating the AFSL application process can be complex and time-consuming, requiring a thorough understanding of the regulatory requirements and the preparation of extensive documentation. This comprehensive guide will walk you through the key steps involved in applying for an AFSL, from determining the necessary authorisations to submitting your application and meeting ongoing compliance obligations.

Understanding AFSL Authorisations and Responsible Managers

Determining Required Authorisations for Your Financial Services Licence

The first step in the AFSL application process is determining the necessary authorisations. These authorisations categorise the financial services your business intends to offer. Choosing the correct authorisations is crucial for legal operation and determines your obligations as a licensee. The authorisations are based on:

• Financial products: Specify the types of financial products your business will handle, such as derivatives, securities, managed investment schemes, bonds, superannuation, and insurance. For example, if your business deals with shares and bonds, your authorisation needs to cover these specific products.
• Financial services: Outline the services your business will provide, including advice, dealing, market making, custodial or depository services, and operating a registered scheme. If you plan to offer financial advice and deal in securities, both services must be included in your authorisation.
• Client types: Indicate whether your services will be offered to retail clients, wholesale clients, or both. Understanding the difference between wholesale vs retail clients is important as this distinction affects your regulatory obligations. Serving retail clients typically involves more stringent consumer protection measures.

Choosing Your Responsible Managers (RMs)

Understanding what is an AFSL Responsible Manager is vital to demonstrating your business’s competence to ASIC. They oversee key financial services and regulatory compliance within your firm, meaning choosing the right RMs is critical to a successful AFSL application. Here’s what to consider:

1. Experience and Qualifications

• Educational Requirements: RMs typically need relevant qualifications, such as an Advanced Diploma in Financial Services or a Bachelor’s Degree in Business, Commerce, Economics, or Finance.
• Work Experience: ASIC expects RMs to have practical experience, such as:
  • At least three of the last five years, or five of the last eight years, providing financial services under an AFSL with similar authorisations to those your business is applying for.
  • For retail advice authorisations, RMs must hold RG146 qualifications (general advice) or meet Financial Adviser Education Standards (personal advice).

2. Fit and Proper Person Test

• RMs must pass ASIC’s character and integrity standards, which include:
  • Background checks for criminal history and bankruptcy.
  • Assessing potential disqualifications (e.g., past convictions for financial misconduct).
• For example, imagine a case where a potential RM has a past conviction for financial misconduct; this would likely disqualify them from the role.

3. Responsibilities

• Overseeing financial services and ensuring compliance with laws and regulations.
• Establishing and fostering a compliance culture within the business.
• For example, if a firm’s compliance processes are inadequate, the RM must rectify them to meet ASIC’s standards.

4. Number of RMs

• The required number of RMs depends on your firm’s size and service complexity:
  • Large firms: Offering a variety of financial products to retail and wholesale clients will require multiple RMs.
  • Small firms: Specialising in niche products may only need one or two RMs.
• For example, a large financial planning firm offering advice on a variety of products to both retail and wholesale clients would likely need more RMs than a boutique firm specialising in a niche financial product.

ASIC’s evaluation of your AFSL application hinges on the suitability and competence of your chosen RMs. Proper selection and detailed documentation of their qualifications and experience are crucial for approval.

Preparing and Submitting Your AFSL Application and Documents for ASIC

To legally operate a financial services business in Australia, obtaining an AFSL is essential. This process involves submitting a comprehensive application to ASIC, demonstrating your ability to meet strict regulatory standards. Success relies on detailed preparation, accurate information, and an understanding of the key requirements.

Alternatively, for those looking to expedite market entry, an option is to purchase an existing AFSL from a holder who is looking to sell. This can provide a quicker route to becoming licensed, although it is vital to thoroughly evaluate any potential purchase to ensure it meets your business needs and regulatory obligations.

Information Required in the Online Application

The AFSL application is a single, online transaction lodged via the ASIC Regulatory Portal. This process supersedes the previous system of submitting a Form FS01 and multiple separate “core proof” documents. The online application now directly collects the essential information required to prove your business’s competence and readiness to operate, including:

• Business Description: A detailed explanation of the financial services and products you will offer, your target clients (retail or wholesale), and projections for growth and revenue. This information was previously provided in a separate A5 Business Description proof.
• Organisational Competence: Details of your Responsible Managers’ (RMs) qualifications, skills, and experience, demonstrating their capability to oversee the financial services for which you are applying. This replaces the former B1 Table of Organisational Competence proof.
• Financial Resources: While you must attest to having adequate financial resources, detailed financial statements and cash flow projections (formerly the B5 Financial Proofs) are now requested by ASIC at a later ‘requirements stage’ if they intend to approve your application.

Key Supporting Documents: People Proofs

While most information is now integrated into the online application, People Proofs remain the primary set of documents that must be prepared and uploaded with your submission. These documents are required for each Responsible Manager and ‘fit and proper person’ and include:

• A signed Statement of Personal Information.
• National criminal history checks (less than 12 months old).
• Bankruptcy checks (less than 12 months old).
• Copies of relevant qualification certificates.

Submitting Your Application to ASIC

After preparing your information and People Proofs, the submission process is as follows:

1. Online Submission:
   Complete the entire online application transaction via the ASIC Regulatory Portal and pay the applicable application fee. All supporting documents, like People Proofs and an organisational chart, are uploaded directly within the portal during this process. This replaces the former multi-step process involving the eLicensing system and separate document submission via email or the MOVEit portal.
2. Assessment Phase:
   ASIC typically takes 4–8 months to assess applications. During this period, an ASIC analyst may request further clarification or additional supporting information to gain a deeper understanding of your business.
3. Final Approval Requirements (The ‘Requirements Stage’):
   Before ASIC grants your AFSL, they will issue a ‘requirements letter’ asking you to provide final evidence of your readiness. This typically includes providing proof of adequate professional indemnity insurance meeting ASIC’s Regulatory Guide 126, and proof of membership in an external dispute resolution scheme like AFCA.

ASIC Assessment and Post-Submission Process

After submitting your AFSL application, ASIC conducts a thorough assessment process to ensure your business meets all regulatory requirements. An ASIC analyst is appointed to review your application and performs an initial check to confirm all required proof documents have been received.

ASIC Review and Requisitions

The ASIC analyst begins their detailed assessment by examining your submitted documentation. During this phase, you can expect to receive requisitions requesting additional information or clarification, and it’s helpful to understand why ASIC asks for more proofs for specific aspects of your application. These requisitions commonly focus on:

• Responsible Manager competency evidence, including more detailed information about their experience providing specific financial services
• Further details about your proposed business operations and service delivery models
• Additional documentation regarding compliance arrangements and risk management systems
• Clarification about your financial resources and how you will meet ongoing capital requirements

The assessment period typically takes 4-6 months, though more complex applications may require additional time. It’s crucial to respond promptly and thoroughly to all ASIC requisitions to avoid delays in the assessment process.

Draft AFSL and Final Requisitions

Once ASIC is satisfied with your application and responses to any queries, they will send you a ‘requirements letter’ and a draft AFSL for your review. This draft outlines:

• The specific financial service authorisations being granted
• Any conditions that will apply to your licence
• The types of clients you can service (retail, wholesale, or both)
• Requirements for maintaining organisational competence

The requirements letter marks the final stage of the assessment. It requests the final evidence needed before the licence can be granted, which typically includes:

• Professional Indemnity Insurance documentation meeting ASIC’s requirements.
• Evidence of adequate financial resources, such as up-to-date financial statements.
• Confirmation of your membership in an external dispute resolution scheme (e.g., AFCA).

You must carefully review the draft AFSL to ensure all authorisations and conditions align with your business needs and provide the requested items to ASIC before the final licence is issued.

Ongoing Compliance and Post-Licensing Requirements

Ongoing Procedural Documentation

AFSL holders must maintain comprehensive procedural documentation to meet their regulatory obligations. This includes detailed compliance procedures, risk management systems, and training programs for representatives. The documentation must accurately reflect how the business operates and demonstrate ongoing adherence to financial services laws and regulations. For example, AFSL holders must ensure that their representatives and key personnel meet the fit and proper test as an ongoing compliance obligation as required by ASIC. It is crucial for AFSL holders to regularly review and update their procedural documentation to align with any changes in regulations and to consistently meet the fit and proper test requirements.

ASIC Portals and Online Access

Once licensed, ongoing management of your AFSL obligations is handled through several key ASIC portals:

• ASIC Regulatory Portal – This is the primary portal for licensees. It is used for lodging annual financial statements, notifying ASIC of changes to licence details (such as address or Responsible Manager updates), lodging breach reports, and submitting industry funding metrics. This portal consolidates most of the functions of the former AFS Licensee Portal.
• ASIC Connect – Enables the appointment of Authorised Representatives and Financial Advisers, along with Business Name/ABN registrations. This platform is used for managing representative relationships.
• Companies Portal – Allows officeholders to manage company details, including updates to addresses, officeholder information, and other corporate records.

Additional Requirements (Auditor, AUSTRAC, Representatives, Operations)

Several critical post-licensing obligations must be fulfilled:

• Auditor Appointment – An auditor must be appointed within one month of AFSL grant, with Form FS06 submitted to ASIC within 14 days of appointment.
• AUSTRAC Enrolment – Entities providing designated services must enrol with AUSTRAC within 28 days of commencing operations through AUSTRAC Online.
• Representative Management – All Authorised Representative and Financial Adviser appointments must be notified to ASIC within 30 days through ASIC Connect, including any subsequent changes to their details.
• Operational Commencement – Financial services must begin within six months of receiving the AFSL. Extensions may be requested with valid justification, but failure to commence operations can result in licence cancellation.

Conclusion

Obtaining an AFSL requires careful planning, thorough preparation, and meticulous attention to detail throughout the application process. The journey from initial consideration to final approval demands a comprehensive understanding of regulatory requirements and a clear demonstration of organisational competence, financial resources, and compliance capabilities.

For tailored solutions and practical support in navigating the complexities of the AFSL application process, consider contacting our AFSL compliance lawyers at AFSL House. We offer expert guidance and resources to help you manage each stage of the application effectively, ensuring regulatory compliance, minimising potential delays, and building a solid foundation for your financial services business in Australia.

Frequently Asked Questions

Disclaimer: All information provided in this article is strictly general in nature and is not intended to be, nor should it be relied upon as, legal advice.