Step 1: Read ASIC’s guidance

Our regulatory guides, pro forma and sample online application will help you comply with the requirements.

Preparing your licence application

• Regulatory Guide 1 AFS Licensing Kit: Part 1 – Applying for and varying an AFS licence (RG 1)
• Regulatory Guide 2 AFS Licensing Kit: Part 2 – Preparing your AFS licence or variation application (RG 2)
• Regulatory Guide 3 AFS Licensing Kit: Part 3 – Preparing your additional proofs (RG 3). This document is particularly important for issuers of margin lending facilities.
• Pro Forma 209 Australian financial services licence conditions (PF 209), which outlines the standard conditions that typically apply to AFS licensed entities and margin lending facilities
• Sample AFS eLicensing application. This sample application lists the questions that you could be asked when completing the ASIC online application. The margin lending questions that you must complete are:
  • Question A4 – You must select the relevant deal and advice authorisations for standard and/or non-standard margin lending facilities
  • Question A5.5 – You must select ‘margin lender’ to describe your business activities
  • Question B1.6 – You must select ‘margin lending’ to describe a responsible manager’s area of expertise
  • Question B3.1.6 – You must state whether you have made arrangements with issuers of margin lending facilities and retail clients to receive notifications of margin calls on behalf of retail clients
  • Question B3 – You must select the functions that will be outsourced, if at all, and
  • Question C10 – You must complete all of the questions in this section.

Meeting your licensing, conduct and disclosure obligations

• Regulatory Guide 105 AFS licensing: Organisational competence (RG 105). We expect applicants to demonstrate the appropriate level of competence when applying for an authorisation to provide margin lending facilities
• Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126)
• Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146)
• Regulatory Guide 166 AFS licensing: Financial requirements (RG 166). Issuers of margin lending facilities should refer to the relevant appendix in RG 166
• Regulatory Guide 167 AFS licensing: Discretionary powers (RG 167)
• Regulatory Guide 175 AFS licensing: Financial product advisers – Conduct and disclosure (RG 175)
• Regulatory Guide 181 Licensing: Managing conflicts of interest (RG 181), and
• Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) and Regulatory Guide 271 Internal dispute resolution (RG 271), if you provide financial services to retail clients.

Step 2: Decide on the authorisation(s) you need

Look at the features of your margin lending facility and work out whether you need to select:

• a standard margin lending facility authorisation
• a non-standard margin lending facility authorisation, or
• both.

A non-standard margin lending facility is where interests in marketable securities are transferred as part of the margin loan, such as in a stock lending arrangement.

If you are a financial planner providing advice only on margin lending facilities, you will most likely not be issuing margin lending facilities.

In your application, if you select ‘Deal in a financial product’ and then ‘Issue, apply for, acquire, vary or dispose of a financial product’ in relation to margin lending, you will be asked to answer a series of questions about margin lending facilities (Section C10 of the application).

Step 3: Ensure you have responsible managers who can demonstrate the required competencies

You must nominate responsible managers who have the competencies to be granted the authorisation for margin lending facilities. If you are varying your AFS licence and intend to nominate additional responsible managers to meet the competencies of the new authorisation, you will first need to complete Form FS20 Change of details for an Australian financial services licence.

Step 4: Check your professional indemnity insurance

Before authorising you to provide margin lending facilities, we need to be satisfied that your professional indemnity insurance does not, in effect, exclude cover for margin lending facilities. You should check this with your insurance provider before lodging your application.

Step 5: Prepare your application and proofs

Before you lodge your application for an AFS licence or a variation to an existing AFS licence, read Section E of Regulatory Guide 2 AFS Licensing Kit: Part 2 – Preparing your AFS licence or variation application (RG 2), which explains how to submit your accompanying proofs.

RG 2 describes the core proofs you must submit with your application and any additional non-core proofs we may request as part of our assessment.

At a minimum, you must lodge an ‘A5 Business Description’ core proof and a ‘B1 Organisational Competence’ core proof, which includes a ‘Table of Organisational Competence’.

A5 Business Description

You must provide enough information in the A5 Business Description core proof for us to understand how your business works and the relevance of the licence authorisations you have selected (including any new authorisations).

You must:

• describe the margin lending business you want authorised under the AFS licence
• provide details of the particular types of products involved, and
• document any relevant processes or measures you have implemented or developed specifically for the provision of margin lending facilities.

The matters that may be addressed in these documented processes or measures include:

• assessment of a client’s income
• selection of margin lending products
• gearing policy including loan to value ratios
• risk mitigation
• client contact procedures where acting as an agent, and
• procedures for any deviation from these processes or measures.

RG 2 explains the level of detail and information that must be included in the A5 Business Description core proof.

B1 Organisational Competence (see RG 2 and RG 105)

You must provide enough information in the B1 Organisational Competence core proof for us to assess whether you meet the organisational competence requirements for the financial services and products that you are applying for.

This core proof includes a ‘Table of Organisational Competence’ and, if applicable, a ‘Submission on a Responsible Manager’s Competence’.

In preparing this information for margin lending facilities, you must:

• specifically outline the relevant expertise and experience of your nominated responsible managers as it relates to margin lending, and
• include details of any qualifications or courses completed by your nominated responsible managers that cover either margin lending or the underlying marketable securities over which margin loans have been issued.

Step 6: Lodge your application and pay the lodgement fee

You can apply online for an AFS licence with an authorisation to provide margin lending facilities.

If you already hold an AFS licence, you can apply for an authorisation to provide margin lending facilities by lodging Form FS03 Application for variation of authorisation and other conditions.