AFS licensee obligations

Australian financial services (AFS) licensees have a general obligation to provide efficient, honest and fair financial services. You must comply with the conditions of your AFS licence and the Corporations Act 2001.

Class order relief or individual relief may be available for some obligations. See Applying for relief – AFS licensees.

You must notify us if you are unable to meet, or have breached, any of these obligations. For more information, see Breach reporting.

On 1 January 2019Professional standards for financial advisers commenced. AFS licensees have an obligation to ensure their financial advisers comply with these standards. This includes notifying ASIC when financial advisers have complied (or failed to comply) with the standards. 

General obligations

AFS licensees have obligations relating to:

  • conduct and disclosure
  • the provision of your financial services
  • the competence, knowledge and skills of your responsible managers
  • the training and competence of your financial advisers and authorised representatives
  • ensuring your financial advisers and authorised representatives comply with the financial services laws
  • compliance, managing conflicts of interest and risk management
  • the adequacy of your financial, technological and human resources, and
  • your dispute resolution and compensation arrangements (if your clients include retail clients).

See Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104) for information about compliance with the general obligations under s912A(1) of the Corporations Act 2001.

Financial obligations

AFS licensees must meet certain financial obligations. These obligations vary depending on the financial products and services you offer.

Enhanced financial obligations apply to AFS licensees following changes made to net tangible asset and preparation of cash flow projections requirements. AFS licensees impacted by these changes are:

  • responsible entity
  • operator of investor directed portfolio services
  • custodial or depository services provider (including as a provider of incidental custody services)
  • trustee company providing traditional services
  • issuer of margin lending facilities
  • foreign exchange dealer, and
  • retail OTC derivative issuer.

See Regulatory Guide 166 Licensing: Financial requirements (RG 166) to understand your financial obligations.

Risk management systems

As an AFS licensee, you must have adequate risk management systems in place. RG 104 outlines our general guidance for meeting this obligation.

For responsible entities, see Regulatory Guide 259 Risk management systems of responsible entities (RG 259). This guide outlines our expectations for risk management systems at the business and scheme level. It is also relevant for operators of managed discretionary accounts, investor directed portfolio services and unregistered schemes.

External dispute resolution (EDR)

From 1 November 2018, the Australian Financial Complaints Authority (AFCA) is the single dispute resolution scheme for financial services. AFCA may be able to resolve complaints that a financial firm could not resolve by internal dispute resolution.

AFCA considers complaints that were previously handled by the Financial Ombudsman Service, the Credit and Investments Ombudsman and the Superannuation Complaints Tribunal.

When AFS licensees join AFCA, they must notify ASIC within 10 business days. If they are not a member of AFCA, they are may be in breach of their licence obligations. ASIC Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) sets out who must have a dispute resolution system and which financial firms must be members of AFCA.

For more information, see Dispute resolution.

Changes you must tell us about

You must notify ASIC of any changes to your AFS licence, such as when:

For notification periods, fees and how to make changes, see lodgement requirements for AFS licensees.

ASIC regulatory guidance

Your AFS licence obligations are explained in our regulatory documents.

AFS licensee requirement/obligation

Regulatory guide

Financial requirements (for example, solvency and cash)

Regulatory Guide 166 Licensing: Financial requirements (RG 166)

Responsible managers (qualifications and experience)

Regulatory Guide 105 Licensing: Organisational competence (RG 105)

Monitoring, supervising and training your representatives (including authorised representatives)

Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104)

Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146)

General compliance and risk management

Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104)

Regulatory Guide 259 Risk management systems of responsible entities (RG 259)

Technological and human resources

Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104)

Managing conflicts of interest

Regulatory Guide 181 Licensing: Managing conflicts of interest (RG 181)

Dispute resolution (internal and external)

Regulatory Guide 165 Licensing: Internal and external dispute resolution (RG 165)

Compensation and insurance arrangements

Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126)

Compensation arrangements (security bonds and professional indemnity insurance)

Regulatory Guide 167 Licensing: Discretionary powers and transition (RG 167)

Conduct and disclosure

Regulatory Guide 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) (RG 168)

Regulatory Guide 175 Licensing: Financial product advisers – Conduct and disclosure (RG 175)

See Professional standards for financial advisers for information about the reforms that were introduced into the Corporations Act 2001 by the Corporations Amendment (Professional Standards of Financial Advisers) Act 2017.

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Last updated: 13/11/2019 05:34