The Administrative Appeals Tribunal (AAT) has affirmed ASIC’s decision to refuse an application from Clemente Group Holdings Pty Ltd (Clemente) seeking an Australian Financial Services (AFS) licence to provide various financial services, including to make a market in derivatives. 　

In her decision, the AAT’s Senior Member J F Toohey said:　

'In my assessment of the evidence, the applicant has not demonstrated that it has sufficient technical, human and financial resources to conduct the proposed business and mitigate the risks associated with it, and Mr Batten [the sole director, sole shareholder and its sole nominated responsible manager] does not appear seriously to have addressed those risks. There is sufficient reason to believe that the applicant is likely to contravene the obligations that will apply under s 912A if the licence is granted, in particular the obligations in s 912A (d), (e) and (h). For these reasons, I affirm the decision under review.'　

Welcoming the decision, Deputy Chairman Peter Kell said, ‘The AAT’s decision supports ASIC's expectation that an application for an AFS licence must be prepared to a high standard.　

'In particular, it should clearly explain the financial services the applicant intends to offer, and provide consistent and credible information to support and demonstrate that the applicant has the ability to deliver the requested financial services in a professional and compliant manner. 　

'This case further emphasises the point that in deciding whether to grant a licence, ASIC will also have regard to any prior non-compliant conduct by the applicant, its directors and controllers. 　

‘This decision reinforces the earlier AAT decision of 31 August 2016 in relation to IMS FX Services Pty Ltd that applicants must ensure that they conduct themselves in a manner that duly respects their obligations under the law when applying to ASIC for an AFS licence.' (refer 16-284MR ASIC cancels IMS FX Services Pty Ltd’s Australian financial services licence).　

Background　

On 24 March 2014, Clemente applied for an AFS licence to provide financial product advice and deal in a financial product and make a market in derivatives, in respect wholesale clients only. On 24 December 2014, following a hearing in October 2014 at which the applicant made submissions, ASIC’s hearing delegate determined that ASIC could not be satisfied that there is no reason to believe that the applicant is likely to contravene the obligations that will apply if an AFS licence is granted.　

Consequently, ASIC refused Clemente's application for an AFS licence. Clemente then appealed ASIC's decision to the AAT. The AAT decision is a hearing de novo (hearing the matter afresh) and on 29 September 2016, the AAT affirmed ASIC’s decision to refuse the application for an AFS licence on similar grounds. A copy of the AAT's decision is available here. 　

Section 912A1) (d), (e) and (h) of the Corporations Act, 2001 require an AFS licensee to:　

• have adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and to carry out supervisory arrangements,　
• maintain the competence to provide those financial services, and 　
• have adequate risk management systems.