How do RSE and AFS licensing application processes work together
This information sheet (INFO 86) provides guidance for:
- public offer superannuation trustees who need an Australian financial services (AFS) licence to deal in financial products in their capacity as a trustee (such as interests in securities)
- superannuation trustees who need an AFS licence to provide financial product advice (usually in relation to interests in their own funds or investment life products associated with those funds).
This information sheet explains how the Australian Prudential Regulation Authority’s (APRA) registrable superannuation entity (RSE) licensing process and ASIC’s AFS licensing process work together.
- Why do some trustees need both an RSE licence and an AFS licence?
- How do the APRA and ASIC licensing processes differ?
- How does the legislation minimise potential overlap?
- How do the APRA and ASIC requirements interact?
- Should trustees lodge applications at the same time?
- Where can I find out more about the RSE licensing process?
- Where can I find out more about the AFS licensing process?
An RSE licence is not the same as an AFS licence. An RSE licence allows an APRA-regulated trustee to operate a superannuation fund. An AFS licence allows a person to carry on the business of providing financial services by, for example, providing financial product advice or dealing in financial products such as interests in superannuation funds.
Accordingly, APRA and ASIC each have a different focus when considering whether an RSE licence or an AFS licence should be granted.
APRA’s licensing requirements are prudentially focused and concentrate on the probity and competence of superannuation trustees, as measured by the fitness and propriety of their ‘responsible persons’ against APRA’s Fit and Proper prudential standards. The APRA licensing process also focuses on the operations, systems and resources (including risk management systems and financial resources) that trustees have in place to prevent or minimise losses to those who hold interests in the superannuation fund. This means that APRA needs information to assess the honesty and integrity of an applicant for an RSE licence, as well as their competence to operate the superannuation fund for the benefit of the members and beneficiaries.
ASIC’s licensing requirements mainly focus on consumer protection and market integrity. ASIC assesses whether an applicant for an AFS licence will provide financial services in an efficient, honest and fair manner, including an assessment of the applicant’s competence to provide financial services (such as providing advice about interests in a superannuation fund). In order to conduct this assessment, ASIC usually needs the applicant to provide information about the qualifications of its ‘responsible managers’ and whether they are of good fame and character. ASIC may also ask the applicant to provide information relevant to the assessment of matters such as its compliance measures and its processes for handling complaints from retail clients.
The ASIC licensing process also focuses on the operations, systems and resources (including risk management systems and financial resources) for RSE licensees authorised to operate registered managed investment schemes.
The RSE and AFS licensing requirements may potentially overlap; however, any overlap has been minimised, both by legislation and by the practices of the regulators. ASIC requires less information from entities that are also regulated by APRA than it does from other entities.
An assessment of the financial, technological and human resources and risk management systems of a trustee is important for both APRA and ASIC. The Corporations Act has the effect that where an AFS licensee is regulated by APRA, ASIC is only required to separately assess or monitor the licensee’s level of resources or risk management systems when the licensee holds an RSE licence and is also authorised to operate registered managed investment schemes.
This means that ASIC does not always require a superannuation trustee who is an RSE licensee, or is applying for an RSE licence, to provide information about its financial, technological or human resources, or its risk management systems – only where the trustee also operates registered managed investment schemes.
Previously, ASIC did not require bankruptcy and criminal history checks or business references from AFS licence applicants that were also RSE licensees or applicants for an RSE licence.
However, ASIC now requires additional information and documents about the responsible officers and responsible managers of AFS licence applicants that are also a body corporate and/or an APRA-regulated body.
For more information, see Information Sheet 240 AFS licensing – Requirement for certain applicants to provide further information (INFO 240).
Where an RSE licensee applies for an AFS licence, ASIC will accept that a responsible manager who meets APRA’s standards (such as APRA’s Superannuation Guidance Note SGN 110.1 Fit and proper) has adequate qualifications and training for those financial services that APRA also regulates (e.g. to issue interests in a superannuation fund) under option 1 in ASIC’s Regulatory Guide 105 Licensing: Organisational competence (RG 105). The applicant will still have to show that the relevant responsible manager has 3 years relevant experience over the past 5 years in order to satisfy option 1 in RG 105.
ASIC also requires an applicant to provide detailed information about the relevant qualifications, training and experience of the responsible managers who provide additional financial services, such as providing personal financial product advice and other financial services not directly related to issuing interests in the superannuation entity.
Applicants should note that the criminal history checks suitable for APRA assessment contain more information than the criminal history checks for ASIC due to the operation of the law in relation to spent convictions. This means that if the applicant for an RSE licence already has an AFS licence, APRA will insist on a new, more comprehensive, criminal history check for the responsible persons in its assessment for the RSE licence.
Where a trustee does not hold an RSE or AFS licence, it should apply to APRA for an RSE licence and to ASIC for an AFS licence at the same time. It should indicate that it has also applied for an AFS or RSE licence in each application.
When ASIC is satisfied that the superannuation trustee should be granted an AFS licence, ASIC will issue a draft AFS licence subject to the applicant receiving an RSE licence from APRA. ASIC will then grant the AFS licence when the applicant is granted the RSE licence by APRA.
See the Licensing guidelines for superannuation webpage on the APRA website.
See the AFS Licensing Kit (RG 1-3).
Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. Omission of any matter in this information sheet will not relieve a company or its officers from any penalty incurred by failing to comply with the statutory obligations of the Corporations Act.
You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases your particular circumstances must be taken into account when determining how the law applies to you.
This is Information Sheet 86 (INFO 86), reissued in July 2019.