Let's talk about the elephant in the room...
Updated: Feb 10
We know it's not pretty, it's not fun & doesn't get you out of bed in the morning, but it's critical for running a fund in Australia & market and regulator expectations have increased significantly in the past year.
In the past 18 months we have seen ASIC increasing its scrutiny against non-complying Australian financial services (AFS) licensees and a number of investment funds and licensee holders have found themselves under the spotlight. When a company is found to be non-compliant with ASIC's Australian Financial Services License (AFSL) regulations, they may face various consequences including:
Prosecution and fines
Suspension or cancellation of their AFS license
Disqualification of directors
Public warning notices
Compensation orders for affected clients
Corrective actions and improvements to compliance systems.
The severity of consequences will depend on the nature and extent of the non-compliance.
Of course, the ultimate goal of ASIC's enforcement action is to protect consumers and maintain market integrity. At the same time, it's a reminder that obtaining an AFS licence is actually the easy part!!
The hard part - ensuring that your business has the necessary resources, competence and lasered focus to monitor compliance, assess risks, and review systems, with regards to CAR and Authorised Representatives.
At Avenir Capital we've seen this first hand with our AFSL for hire service. In the past month we've just signed up another client who had their fund frozen on one of the major
distribution platforms due to concerns over the fund's compliance arrangements. The fund was not able to accept new investments - although redemptions were still allowed!
The platform only agreed to unfreezing the fund IF the AFSL and compliance business was moved to us here at Avenir Capital. This fund is now benefiting from our rigorous compliance procedures & welcoming back new investment.
If you're a new fund, or looking to set up a fund very soon don't worry about being slowed down by the process of obtaining an AFSL license. You can use an 'AFSL for hire', AFSL for rent' - or otherwise referred to as Authorised Representative - who can act as trustee for the funds invested. These can be in a variety of asset classes, including equities, funds managements and real estate. What this means is that your compliance headache, particularly all of the new fund related compliance tasks, will be dramatically reduced and you can focus on growing your fund and bringing in new investment.
Have any questions around AFSL licenses, Australian Financial Services License for Hire services or would like to discuss your compliance needs further?