The Australian Securities and Investments Commission (ASIC) today announced that the second stage of a compliance campaign to remove unlicensed operators from the financial services industry was underway.
‘Since the financial services reforms came into full effect on 11 March this year, all financial services providers have been required to operate under an Australian financial services licence (AFSL), unless an exemption applies’, ASIC’s Executive Director of Financial Services Regulation, Mr Ian Johnston said.
‘Unlicensed operators put consumers at risk and potentially damage the reputation of the financial services industry’, Mr Johnston said.
The focus of the first phase of the campaign was the orderly transition of all old law licensees, including financial advisers, securities dealers and insurance brokers, to the new licensing regime. This phase is now complete and ASIC’s attention has turned to identifying and taking action against unlicensed operators, including those who were not previously required to hold a licence but who are now regulated under the new law.
Results of phase 1
In late December 2003, ASIC identified 966 old law licensees and certain APRA-regulated entities that had not applied for an AFSL. The campaign taskforce contacted these licensees to ascertain what action they would be taking to obtain an AFSL by the 10 March 2004 deadline and to inform them of the consequences of failing to do so in time. ASIC also issued a media release, [MR 04/013] ASIC warns ‘no licence, no business’, to remind industry participants of the necessity of transitioning to the new regime by the deadline if they wished to continue their business.
During phase 1 of the campaign ASIC followed up on these 966 businesses. As a result of its inquiries, ASIC can report that most unlicensed entities in this group have either restructured their businesses to operate under an AFSL held by a related entity, or become an authorised representative of another licensee. Other entities decided to exit the industry rather than obtain an AFSL.
In short, ASIC found that the number of entities who had not made appropriate arrangements for conducting their financial services businesses after 10 March 2004 was much lower than originally feared. A small number of unlicensed operators in this group may be the subject of legal action.
‘ASIC was delighted that our message to industry about the need to obtain an AFSL by the transition deadline made an impact on the vast majority of existing industry participants’, Mr Johnston said.
Phase 2: Taking Action
Phase 2 of the campaign, which is to identify any other businesses operating without a licence, is now underway. Over the next six months ASIC will be conducting compliance checks on anyone that appears to be conducting a financial services business without an AFSL. The results of the phase 1 process have assisted ASIC in identifying targets for these compliance checks.
‘If you are operating a financial services business without holding an AFSL or representing a licensee, you can expect to hear from us. ASIC will take action against anyone we find breaching the law’, Mr Johnston said.
The penalty for carrying on a financial services business without a licence is a $22,000 fine or imprisonment for two years, or both.
ASIC encourages consumers to check they are dealing with either a licensed financial services provider or an authorised representative of a licensee. Consumers can find this information by searching the registers of licensees and authorised representatives on ASIC’s website via www.asic.gov.au/search.
Anyone with information about unlicensed financial services businesses should contact the ASIC Infoline on 1300 300 630.
End of release
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