media release

IR 07-45 ASIC updates guidance on licensee obligations

Published

ASIC has released two regulatory guides about the general obligations of Australian financial services (AFS) licensees under s912A of the Corporations Act(the Act).

Regulatory Guide 104 Licensing: Meeting the general obligations [RG 104] and Regulatory Guide 105 Licensing: Organisational competence [RG 105] are part of ASIC’s Better Regulation initiatives, which are designed to achieve better and more transparent regulation.

The regulatory guides aim to:

  • communicate ASIC’s policy on the general obligations of licensees and organisational competence using simpler language;
  • clarify some aspects of the policy in light of ASIC’s regulatory experience; and
  • consolidate and harmonise ASIC’s policy on these obligations. Our policy was previously covered in both Regulatory Guide 164 Licensing: Organisational capacities [RG 164] and Regulatory Guide 130 Managed investments: Licensing [RG 130]. RG 164 and RG 130 are now superseded.

[RG 104] and [RG 105] also include the following minor adjustments to ASIC’s policy:

  • [RG 104] refers to various Australian standards and international principles that will help licensees think through their obligations and design measures for ensuring compliance.
  • [RG 105] uses the term ‘responsible manager’ to identify the category of people ASIC looks at when assessing organisational competence. [RG 164] previously referred to this category of people as ‘nominated responsible officers’.
  • [RG 105] clarifies how ASIC’s policy on organisational competence applies to licensees who are regulated by both APRA and ASIC.

While the changes come into effect immediately, ASIC accepts that it may take some time for existing AFS licensees to amend their internal policies and procedures by updating any references to these new regulatory guides. ASIC expects, however, that licensees will update these references the next time they amend their internal policies and procedures.

For applicants or AFS licensees who have already started or lodged an AFS licence application or a variation application, ASIC will not refuse the application simply because it refers to [RG 164] and/or [RG 130]. However, ASIC expects applicants who are only beginning to prepare their application to take into account the guidance in [RG 104] and [RG 105] when preparing their application and supporting ‘proof’ documents. For more information on how to apply for an AFS licence or licence variation, refer to the AFS Licensing Kit (RG 1, RG 2 and RG 3).

Background

AFS licensees have general obligations under s912A(1) of the Act that they must comply with from the time they are granted an AFS licence and on an ongoing basis. The general obligations promote consumer confidence in financial services and the provision of efficient, honest and fair financial services by all licensees and their representatives. If ASIC has any reason to believe that licensees are not complying with their obligations, it may take administrative action, which could include suspending or cancelling a licence (under s915C(1)) or imposing additional licence conditions (under s914A(1)).

RG 104 outlines what ASIC looks for when it assesses compliance with the general obligations. It sets out ASIC’s general approach to the licensee obligations under s912A(1) and ASIC’s policy on particular s912A(1) obligations relating to compliance, risk management, representatives and resources.

RG 105 outlines what ASIC looks for when considering the organisational competence obligation of AFS licensees under s912A(1)(e). It also consolidates ASIC’s guidance on this obligation, which was previously spread across a number of publications, including Section E of RG 164, parts of [RG 130] and Responsible officers: Demonstrating compliance with organisational competency obligations—An ASIC guide (issued July 2003, withdrawn June 2007).

The AFS Licensing Kit is another key licensing publication that provides guidance on the licence application and licence variation processes and what applicants must do to demonstrate that they are able to meet their obligations as a licensee. The AFS Licensing Kit will be updated later this year to reflect the changes in [RG 104] and [RG 105].

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