If you're on the fence when it comes to AFSL, read this!
“Do you need your own AFSL or can you use someone else’s?”
“HELP. I want to provide financial services but I don’t hold an Australian Financial Services Licence!! What are my options…?”
These are the most common questions we hear from people when they're entering the world of AFSL! And what we can say with hopefully some reassurance for you, is that yes, you do need to operate under an Australian Financial Services Licence (AFSL) but not having one doesn’t need to slow you down!
In summary, you have 2 options:
Option 1: Apply for your own AFSL: You can apply for an AFSL directly from ASIC if you meet the eligibility criteria and have the required systems, resources, and compliance processes in place.
Option 2: Use another company's AFSL: If you do not want to apply for your own AFSL, you can use another company's AFSL by entering into a "credit services agreement" with them. This means that the licensee will provide you with the license to operate under and you can offer financial services under their license.
Regardless of which option you choose, you must still comply with all relevant laws, regulations, and obligations of an AFSL holder.
If you'd like to dive in a little deeper read on....!
Option 1: Applying for your own AFSL
Let's first touch on timings! As a general rule, you should allow six to eight months to obtain a draft AFS licence from ASIC.
The following are the 5 key steps involved in applying for an AFSL:
1. Determine which authorisations you will need for your financial services business.
This will depend on aspects such as whether you will be trading or just providing financial advice - or both? Will you provide your product or service to retail or
wholesale clients - or both? Will you be operating a registered scheme? Will you be providing a custodial or depository service?
You need to ensure that you think through the full range of your new business product or service and what activities you will be engaged in. It can become pretty complex and there are serious penalties if ASIC find that you are not operating without the appropriate AFSL and/or without the appropriate authorisations.
2. Choose your Responsible Managers – for this you must ensure that the Responsible Managers (RM) you nominate has the appropriate experience and capabilities to provide the authorisations you need.
3. Prepare your Documents for ASIC – these documents include a Business Description, People proofs for each nominated Responsible Manager (police check, bankruptcy check, qualifications check) through to provide Financial Resources Statements and evidence of Organisational Expertise.
Depending on the authorisations for which your business is seeking to get an AFSL, ASIC will require the submission of additional proof documentation. Some of the documents which may be required include:
5. Ongoing Procedural Documentation – As you will have ongoing compliance obligations for your AFSL you will need to have the systems in place as well as a suite of procedural documents in order to manage and comply with strict ASIC regulations. Other obligations include...
Holding adequate professional indemnity insurance
Maintaining a minimum level of net tangible assets
Producing regular cash flow projections to ensure the availability of sufficient financial resources to meet obligations on an ongoing basis.
Phew.... still with us?!!!
Let's look at the alternative....
Option 2: Using another company's AFSL
What does this mean? This arrangement allows you - the company offering financial services or products - without having to go through the time and expense of obtaining your own AFSL. If you're looking around just be aware of the various terms used in the industry to describe this service, including 'AFSL for rent', 'AFSL for hire', 'intermediary authorisation', through to 'authorised representative' or 'AR services'.
Here's how it works:
Agreement: You - as the company that wants to offer financial services - enters into an agreement with an AFSL holder to use their license.
Compliance: You must ensure that your company complies with all laws, regulations, and obligations required under the AFSL, including responsible lending, disclosure, and reporting requirements.
Responsibility: The AFSL holder retains ultimate responsibility for ensuring that your company is compliant with all applicable laws and regulations. The AFSL holder for example has to report any breaches to ASIC.
Reporting: You must report to the AFSL holder, who must then report to ASIC.
Fees: You'll pay a fee to the AFSL holder for the use of their license and ongoing compliance support.
Bear in mind that using another company's AFSL also means that you must operate within the constraints of the AFSL holder's license and you must rely on the AFSL holder to ensure compliance with all relevant regulations.
Your next step....
If you're interested in obtaining your own AFSL licence, this is the best starting point: ASIC
And speak with us here at Avenir Capital! We hold a broad-ranging (and blemish-free since it was granted in 2011) Wholesale Australian Financial Services Licence (AFSL 405469) which can be used by firms operating in the Funds Management and Asset Management industries. If you're not wanting to use our licence for the long term, ie you may be wanting to obtain your own licence down the line, that's all good... you can just access our AFSL for rent service on a short term basis. Or if you're wanting to be with us for on a longer term basis, you can tap into better rates and complimentary value-add services.
We can also assist you in obtaining your own AFSL in conjunction with our partner, Tom O'Callaghan at 360 Certainty.
Contact us today for an obligation free consult:
>> Complete our short enquiry form
OR, contact one of our team directly, Anya, on 0438 355 002 or email firstname.lastname@example.org