Licensing requirements for providers of funeral expenses facilities
This information sheet (INFO 243) outlines the licensing requirements that apply to providers of funeral expenses facilities.
These facilities were previously exempted from the definition of 'financial product' in the Corporations Act 2001 (Corporations Act) and the requirement to hold an Australian financial services (AFS) licence.
This exemption has now been removed as a result of:
- the Financial Sector Reform (Hayne Royal Commission Response—Protecting Consumers (2019 Measures)) Bill 2019, which was passed by Parliament on 6 February 2020, and
- the Treasury Laws Amendment (Financial Services Improved Consumer Protection (Funeral Expenses Facilities) Regulations 2019, which were made by the Governor General on 28 November 2019 and are in force from 1 April 2020.
Generally, from 1 April 2020, if you provide a funeral expenses facility, you will need to hold an AFS licence and comply with relevant obligations, unless the facility does not meet the definition of a 'financial product' in s763A or 764A of the Corporations Act.
This information sheet explains:
- what is a ‘funeral expenses facility’
- how the AFS licensing requirements apply
- when you need an AFS licence to provide a funeral expenses facility
- what exemptions are available
- what are your obligations as an AFS licensee
- how to apply for a licence, and
- how ASIC will assess your application.
A 'funeral expenses facility' is a scheme or arrangement for the payment of money when a person dies, for the purpose of paying all or part of the expenses of, and incidental to, the person's funeral, burial or cremation: see s761A.
Generally, this includes facilities where the client is entitled to receive a sum of money that is to be used for the purpose of paying for funeral, burial or cremation services.
Facilities that provide these kinds of benefits may be:
- insurance products (either insurance contracts that give a right to payment of a sum on the death of a person, or some other kind of life policy within the meaning of the Life Insurance Act 1995), or
- a facility that is not insurance, but enables the client to manage financial risks relating to funeral services or to make a financial investment for the purpose of providing funds for a funeral service.
If a facility entitles the client to a sum of money to use for funeral and related expenses, rather than providing the funeral services themselves, it will be treated as a 'funeral expenses facility', which may be a financial product, and not as a 'funeral benefit' which is not a financial product: see s765B.
The Corporations Act regulates the provision of financial products and financial services in relation to such products.
Before 1 April 2020, facilities that provided certain benefits relating to funeral, burial and cremation services were exempt from being regulated as a 'financial product'. Two kinds of facilities were exempted:
- 'funeral benefits' (see s765A(1)(w)), and
- 'funeral expenses policies' (see reg 7.1.07D).
Regulation 7.1.07D has now been repealed under the Treasury Laws Amendment (Financial Services Improved Consumer Protection) (Funeral Expenses Facilities) Regulations 2019.
This means that facilities previously operating with the benefit of this exemption may now be a 'financial product' if the facility meets the general definition (s763A) or specific definition (s764A) of a 'financial product' in the Corporations Act. Anyone who provides, gives advice about, distributes, deals in or issues those facilities is now providing a 'financial service' that is regulated under the Corporations Act.
The exemption for 'funeral benefits' continues. This means that some funeral-related products, such as prepaid funeral agreements with funeral service providers, are not financial products and are not affected by these changes.
From 1 April 2020, if you provide a 'funeral expenses facility' that meets the definition of a 'financial product' in s763A or 764A of the Corporations Act, you must hold an AFS licence authorising you to provide these facilities.
If you provide a funeral expenses facility that is a financial product and you already hold an AFS licence, you have until 31 December 2020 to obtain a variation to your existing licence that authorises you to provide these facilities.
|Up to 31 March 2020||Providers of funeral expenses facilities are not required to hold an AFS licence.|
|From 1 April 2020 to 31 December 2020||Providers who do not already hold an AFS licence
From 1 April 2020, providers who do not already hold an AFS licence must not issue any new funeral expenses facilities. To provide funeral expenses facilities from 1 April 2020, these providers must:
Providers who already hold an AFS licence
The exemption in reg 7.01.7D will continue to apply to facilities issued by these providers until 1 January 2021.
This means that:
Distributors and financial advisers
|From 1 January 2021||All providers of funeral expenses facilities that meet the definition of a financial product in s763A or 764A must hold an AFS licence to issue these products.
Distributors and financial advisers dealing in funeral expenses facilities will need to comply with obligations associated with providing a financial product.
Certain exemptions from the requirement to hold an AFS licence are generally available for the provision of financial services (i.e. not just funeral expenses facilities): see s911A(2) of the Corporations Act and reg 7.6.01 of the Corporations Regulations 2001. Some of these exemptions may be available, depending on your circumstances.
These exemptions generally specify a limited range of circumstances in which they apply. If you intend to rely on one of these exemptions, make sure you are aware of any restrictions on the kind of conduct you can engage in under the exemption.
There is a new specific exemption for those who are funeral service providers and who engage in financial services in the course of distributing funeral expenses policies that are issued by friendly societies: see reg 7.6.01(1)(ta) and 7.6.01(7).
This exemption covers people such as funeral directors who distribute these products in the ordinary course of their business as a funeral service provider. It does not cover the distribution of products issued by entities that are not a friendly society.
Some bodies may arrange cover for their members under group policies. These bodies may be able to rely on relief contained in ASIC Corporations (Group Purchasing Bodies) Instrument 2018/751.
You can also apply to ASIC for individual relief from the requirement to hold an AFS licence. Fees apply to relief applications. For more information, see:
- Regulatory Guide 51 Applications for relief (RG 51)
- Information Sheet 82 Apply for relief (INFO 82), and
- Regulatory Guide 21 How ASIC charges fees for relief applications (RG 21).
As an AFS licensee, you have a range of obligations, including:
- general obligations outlined in s912A–912B of the Corporations Act
- obligations that relate to your dealings with ASIC (see s912C–912DB)
- obligations that relate to the provision of financial product advice and giving clients information about the financial services you provide (see Pts 7.7–7.7A)
- other specific obligations relating to matters such as dealing with client money and restrictions on hawking financial products (see Pt 7.8), and
- obligations to provide important information about the financial product in a Product Disclosure Statement (see Pt 7.9).
You will need to demonstrate that you can meet these obligations when applying for an AFS licence or variation to an existing licence to provide funeral expenses facilities.
From 1 April 2020, it is an offence to provide a funeral expenses facility that is a financial product without an AFS licence or relief. Penalties apply for unlicensed conduct.
ASIC can take enforcement action if you breach your obligations as an AFS licensee. This includes cancelling or suspending your licence or imposing conditions on your licence, as well as civil penalties.
For more information, see:
- Regulatory Guide 38 The hawking prohibitions (RG 38)
- Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104)
- Regulatory Guide 105 Licensing: Organisational competence (RG 105), and
- Regulatory Guide 168 Disclosure: Product Disclosure Statements (and other disclosure obligations) (RG 168).
See also other relevant regulatory guides listed at the end of this information sheet.
You can find information about how to apply for an AFS licence on our website under Applying for and managing an AFS licence.
Before you apply for a licence, you should read the AFS Licensing Kit:
- Regulatory Guide 1 Applying for and varying an AFS licence (RG 1)—Read this for an overview of the application process.
- Regulatory Guide 2 Preparing your AFS licence or variation application (RG 2)—This helps you answer the questions in the application form and prepare your 'core' supporting proof documents.
- Regulatory Guide 3 Preparing your additional proofs (RG 3)—This explains any additional 'non-core' proof documents you might be asked to provide.
The type of financial product involving funeral expenses facilities that you provide will depend on the structure of the product. When you apply for a new AFS licence or a variation to an existing AFS licence, you will need to identify which financial product(s) you will be providing financial services for as a funeral expenses facility.
The relevant types of financial products include:
- life risk insurance products (see s764A(1)(e))
- investment life insurance products (see s764A(1)(f))
- a facility through which a person manages a financial risk (see s763C)—in this case, the authorisation will be for 'Miscellaneous financial risk products: funeral expenses facility', or
- a facility through which a person makes a financial investment (see s763B)—in this case, the authorisation will be for 'Miscellaneous financial investment products: funeral expenses facility'.
You should consider the particular terms of your facility to determine the relevant type of financial product, and apply for the appropriate authorisation.
If you apply for an authorisation for a miscellaneous financial risk product or miscellaneous financial investment product, you must provide with your 'A4 Proof: Miscellaneous Financial Facility Statement' a legal opinion supporting the authorisation for that type of financial product (and not another type of financial product).
You must also include in your 'A5 Business Description' a description of your facility and your reasons for choosing the type of financial product in your application.
You will also need to demonstrate that you can meet your obligations as an AFS licensee in relation to funeral expenses facilities.
As an AFS licensee, you must pay an annual levy (unless you are a registered charity). For more information, see Regulatory costs and levies.
The AFS licensing regime will work alongside existing state and territory regulation of funeral expenses policies.
We will assess applications for new AFS licences or variations to existing AFS licences for funeral expenses facilities in the same way and against the same criteria as we do for other financial services as set out in RG 1, RG 2, RG 3 and RG 105.
In accordance with the ASIC service charter, we aim to decide whether to grant or vary an AFS licence for 70% of complete applications within 150 days and 90% of complete applications within 240 days of receiving the application.
Your application will take longer if it raises complex or new policy issues, or if you don’t give us all the information we need.
For more information, go to www.asic.gov.au/afslicensing.
- RG 1 Applying for and varying an AFS licence
- RG 2 Preparing your AFS licence or variation application
- RG 3 Preparing your additional proofs
- RG 21 How ASIC charges fees for relief applications
- RG 36 Licensing: Financial product advice and dealing
- RG 38 The hawking prohibitions
- RG 51 Applications for relief
- RG 78 Breach reporting by AFS licensees
- RG 104 Licensing: Meeting the general obligations
- RG 105 Licensing: Organisational competence
- RG 126 Compensation and insurance arrangements for AFS licensees
- RG 166 Licensing: Financial requirements
- RG 168 Disclosure: Product Disclosure Statements (and other disclosure obligations)
- RG 175 Licensing: Financial product advisers—Conduct and disclosure
- RG 181 Licensing: Managing conflicts of interest
- INFO 82 Apply for relief
You can also call ASIC on 1300 300 630 or ask a question online.
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.
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 243 (INFO 243), issued in March 2020.