The Australian Securities and Investments Commission (ASIC) has reissued Pro Forma 209: AFS Licence Conditions, following consultation with industry and a review of the issues raised.
The new document reflects changes made to revised Policy Statements 166 and 146, changes due to be made to PS 166, and provides further clarification on some conditions of Australian Financial Services (AFS) licences.
The summary below gives details on the nature and purpose of each change. A marked-up document showing the changes made to Pro Forma 209 is also available on ASIC’s website at www.asic.gov.au/fs.
If you have an existing AFS licence and wish to take advantage of the changes outlined below, you must apply for a variation to your licence using Form FS03, requesting that the revised versions of all the conditions and definitions listed below be imposed.
Notification to Current & Former Representative’s Clients
Formerly known as ‘Notification Requirements to Representative’s Clients’
Condition 5: the applicant and content of this condition has been modified as follows:
(a) the condition will only be imposed where a licensee is providing ‘personal’ advice to ‘retail’ clients; and
(b) licensees will be required to comply with this condition when directed by ASIC in writing to do so.
Training Requirements for Representatives
Condition 6: expanded to include the revised training requirements that apply for deposit and payment products as a result of revised Policy Statement 146.
Base Level Financial Requirements
Condition 11: adjusted to reflect revised Policy Statement 166 [PS166.25(b) including Note].
Financial Requirements for Managed Investments and Custody Services (IDPS only version)
Conditions 14 & 16: adjusted to clarify transactional function requirements that apply to IDPS operators.
Financial Requirements for Foreign Exchange Dealers
Condition 18: adjusted to illustrate the financial requirements that apply to licensees authorised to deal in foreign exchange contracts to reflect revised Policy Statement 166, Section G.
In addition, clarification of which financial products constitute a ‘foreign exchange contract’ or a ‘derivative’ is provided in the definitions described below.
Financial Requirements for Holding Client Money or Property
Condition 19: minor adjustment to be consistent with revised Policy Statement 166.
Financial Requirements for Licensees Transacting with Clients
Condition 20: expanded to incorporate the changes arising from revised Policy Statement 166 – in particular the requirements relating to transactions on a licensed market by licensees who fall outside of the definition of ‘market participant’ in Pro Forma 209, foreign exchange contracts and derivatives.
The condition also clarifies the reference to ‘client’ under this condition.
Audit Opinion on Financial Requirements
Condition 26(d)(i)(A) & (B): adjusted to reflect revised Policy Statement 166 [PS166.28]. Relates to the areas covered under this audit for the ‘cash needs requirement’ of the ‘Base Level Financial Requirements’ that apply to all licensees except those who are regulated by APRA or are ‘market participants’ as defined in Pro Forma 209.
Professional Indemnity Compensation Requirements
Condition 29: minor adjustment to clarify ‘scheme property’ and ‘IDPS property’ components of the cover required.
Agreement with Holder of Financial Product on Trust
Condition 32: expanded to clarify how the condition applies to responsible entities, IDPS operators and providers of custody service, in particular sub-custodians and master custodians. These changes will also be incorporated into the revised Policy Statement 133 once the review of the Managed Investments policy is completed.
Property
Condition 33: adjusted to clarify how the requirements under Policy Statement 133 applying to custodial services provided and the types of services provided by IDPS operators should work in practice.
Compliance with Class Order 02/294 as an IDPS Operator
Condition 37: new condition imposed in IDPS operators to ensure they meet the requirements of this Class Order when providing financial services in this capacity.
Operation of Discretionary Portfolio Accounts
Condition 38: adjusted so that these requirements only apply to discretionary portfolio services provided by the licensee to ‘retail clients’.
Reports to Clients on Discretionary Portfolio Accounts
Condition 39: adjusted so that these requirements only apply to discretionary portfolio services provided by the licensee to ‘retail clients’.
Systems Audit of Discretionary Portfolio Accounts
Condition 40: adjusted so that these requirements only apply to discretionary portfolio services provided by the licensee to ‘retail clients’.
Audit Report on Discretionary Portfolio Accounts
Condition 41: adjusted so that these requirements only apply to discretionary portfolio services provided by the licensee to ‘retail clients’.
Prohibition to Operate Discretionary Portfolio Accounts
Condition 42: adjusted so that these requirements only apply to discretionary portfolio services provided by the licensee to ‘retail clients’.
Definitions
adequately secured – minor adjustment to be consistent with revised Policy Statement 166.
derivatives – new definition to clarify which type of ‘derivatives’ fall under this definition to address the legal overlap with the definition of ‘foreign exchange contracts’ and ‘derivatives’ under the Act. For example: ‘foreign exchange derivatives’ are considered to be foreign exchange contracts for the purposes of an AFS licence.
excluded assets – adjusted to allow a licensee to include receivables from related insurance companies in certain circumstances.
foreign exchange contracts – new definition to clarify which type of ‘foreign exchange contracts’ fall under this definition to address the legal overlap with the definition of ‘foreign exchange contracts’ and ‘derivatives’ under the Act. For example: ‘foreign exchange derivatives’ are considered to be foreign exchange contracts for the purposes of an AFS licence.
Option 1 – expanded to clarify how cash-flow projections are to be calculated under the cash needs requirements of the ‘Base Level Financial Requirements’ where a licensee is providing financial services as a trustee of a trading trust.
Option 2 – expanded to clarify how cash-flow projections are to be calculated under the cash needs requirements of the ‘Base Level Financial Requirements’ where a licensee is providing financial services as a trustee of a trading trust, plus a minor adjustment to be consistent with revised Policy Statement 166.
relevant trust – new definition linked to the definitions of ‘Option 1’ and ‘Option 2’ to clarify how cash-flow projections are to be calculated under the ‘cash needs requirement’ of the ‘Base Level Financial Requirements’ where a licensee is providing financial services as a trustee of a trading trust.
special custody assets – adjusted to clarify this type of asset as they relate to time-sharing schemes.
End of release