Limited AFS licensees: Complying with your licensing obligations

On this page:

• General licensing obligations
• Staying within scope of your limited AFS licence authorisations
• Training, education and ethics
• Financial Advisers Register
• Dispute resolution
• Compensation and insurance arrangements
• Reportable situations
• Financial requirements
• Ongoing financial reporting
• Advertising financial services

General licensing obligations

As a limited AFS licensee, you must comply with most of the same general licensing obligations as other AFS licensees. The only exemption for some limited AFS licensees is from the obligation to lodge audited accounts (see Ongoing financial reporting).

The general obligations included in the list below are set out in section 912A(1) of the Corporations Act 2001 (Corporations Act) and require you to:

• do all things necessary to ensure that the financial services covered by your limited AFS licence are provided efficiently, honestly and fairly
• have adequate arrangements in place for managing conflicts of interest
• comply with the conditions on your limited AFS licence
• comply with the financial services laws (this includes all of the laws summarised in this information sheet, among others)
• take reasonable steps to ensure that your representatives comply with the financial services laws
• have adequate financial, technological and human resources to provide the financial services covered by your limited AFS licence and to carry out supervisory arrangements
• maintain the competence to provide the financial services covered by your limited AFS licence
• ensure that your representatives are adequately trained and competent to provide those financial services
• have a compliant dispute resolution system and be a member of the Australian Financial Complaints Authority (AFCA), if you provide financial services to retail clients, and
• establish and maintain adequate risk management systems.

While you would have demonstrated that you are able to comply with these obligations when you applied for your limited AFS licence, you must also ensure that you comply with them on an ongoing basis.

For a description of what we look for when we assess compliance with the general licensing obligations, see Regulatory Guide 104 AFS licensing: Meeting the general obligations (RG 104).

Staying within the scope of your limited AFS licence authorisations

It is your responsibility to ensure that you only provide those financial services that are within the scope of your limited AFS licence.

The scope of your limited AFS licence depends on the type of:

• financial services you may provide (e.g. financial product advice on specific products versus class of product advice, and personal advice versus general advice)
• financial product(s) for which you may provide the financial service (e.g. self-managed superannuation funds (SMSFs), life insurance or simple managed investment schemes), and
• clients you may provide those services to (i.e. retail or wholesale clients).

See Information Sheet 227 What can limited AFS licensees do? (INFO 227) for more detailed guidance on the scope and possible authorisations under a limited AFS licence.

Referrals

You can refer your clients to other AFS licensees who are authorised to provide broader kinds of advice that you may be unable to give. In this case, you should take all of the following steps (see regulations 7.6.01(e)–(ea) of the Corporations Regulations 2001):

• Let your client know that the AFS licensee or representative can provide the type of financial service or services they require
• Give your client the contact details of the AFS licensee or representative (rather than arranging for contact to occur yourself), and
• Unless the AFS licensee or representative is related to you (e.g. it is a related company or you are its representative), disclose any benefits or commissions that you or your associates might receive as a result of the referral or any subsequent services provided to the client.

Information Sheet 216 AFS licensing requirements for accountants who provide SMSF services (INFO 216) explains in more detail how you can refer clients to other AFS licensees.

Training, education and ethics

Professional standards apply to financial advisers (relevant providers) who provide personal advice on relevant financial products to retail clients. See Professional standards for financial advisers for more information.

In the case of a limited AFS licensee, these products are superannuation (including SMSFs), securities, simple managed investment schemes and life insurance.

You must ensure that all individuals who give personal advice to retail clients on relevant financial products under your limited AFS licence meet the training and competence requirements that are set out in these standards.

If you are an individual who holds a limited AFS licence and you provide personal advice to retail clients on relevant financial products, you must also meet the training and competence requirements set out in these standards.

Ensuring these standards are met will help you comply with your general licensing obligations to:

• maintain the competence to provide the financial services covered by your licence, and
• ensure that your financial advisers are adequately trained and competent to provide those financial services.

Financial Advisers Register

The Financial Advisers Register is a public record of relevant providers who provide personal advice to retail clients on relevant financial products.

For a relevant provider authorised under a limited AFS licensee, these products are superannuation (including SMSFs), securities, simple managed investment schemes and life insurance.

The Financial Advisers Register contains details about each relevant provider, including work history, qualifications, training, and what products they can advise on. While ASIC manages the Financial Advisers Register, it is each limited AFS licensee’s obligation to add and update information on the register.

You must ensure that all relevant providers under your limited AFS licence are on the register within 30 business days of being authorised. If you are an individual who holds a limited AFS licence and you provide personal advice to retail clients on relevant financial products, you must also add yourself to the register.

For detailed information about the register, including how to appoint a relevant provider to your limited AFS licence and update the register, see Financial Advisers Register.

Registration for relevant providers

Since February 2024, relevant providers who provide personal advice to retail clients on relevant financial products must be registered with ASIC. This is a new requirement that is separate from the requirement for an AFS licensee to appoint a relevant provider to the Financial Advisers Register once they have been authorised. Relevant providers cannot provide personal advice to retail clients on relevant financial products until their registration has been approved by ASIC and recorded on the Financial Advisers Register.

For more information see Information Sheet 276 FAQs: Registration for relevant providers (INFO 276) and Information Sheet 277 Registration of relevant providers: Guidance on making declarations (INFO 277).

Dispute resolution

If you provide financial services to retail clients, you must have a dispute resolution system in place that consists of:

• internal dispute resolution (IDR) procedures that meet certain prescribed standards, and
• membership of AFCA (see subsections 912A(1)(g), (2) and (2A)).

Your IDR procedures and AFCA membership must comply with ASIC’s requirements both when you apply for a licence and on an ongoing basis.

For more information, see Regulatory Guide 267 Oversight of the Australian Financial Complaints Authority (RG 267) and Regulatory Guide 271 Internal dispute resolution (RG 271).

Compensation and insurance arrangements

If you provide financial services to retail clients, you must have arrangements in place to compensate those clients for any losses they suffer as a result of you or your representatives breaching the obligations in Chapter 7 of the Corporations Act. Generally, these compensation arrangements will take the form of professional indemnity (PI) insurance.

When you applied for your limited AFS licence, you would have confirmed that you had adequate PI insurance or a process to ensure that you would have that insurance by the time your limited AFS licence took effect. You must ensure that you maintain this PI insurance on an ongoing basis.

For more information on our expectations regarding compensation and insurance arrangements, see Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126).

Reportable situations

As a limited AFS licensee, you must notify us in writing of all reportable situations. The types of reportable situations include:

• significant breaches or likely significant breaches of ‘core obligations’
• investigations into whether there is a significant breach or likely breach of a ‘core obligation’ if the investigation continues for more than 30 days
• the outcome of such an investigation if it discloses there is no significant breach or likely breach of a core obligation
• conduct that constitutes gross negligence or serious fraud, and
• reportable situations about other licensees.

You must notify ASIC in writing, generally within 30 calendar days after the licensee first knows that there are reasonable grounds to believe a reportable situation has arisen. You should submit the reportable situation with us via the ASIC Regulatory Portal.

For more information on your obligations to submit reportable situations, see Reportable situations for AFS and credit licensees.

Financial requirements

As a limited AFS licensee, we impose financial requirements on you to ensure that:

• you have sufficient financial resources to conduct your financial services business in compliance with the Corporations Act (including carrying out supervisory arrangements)
• there is a financial buffer that decreases the risk of a disorderly or non-compliant wind-up if the business fails, and
• there are incentives for your owners to comply through risk of financial loss.

Assuming you do not hold client money or property and do not transact with your clients as principal, you will need to meet the ‘base level financial requirements’ set out in Regulatory Guide 166 AFS Licensing: Financial requirements (RG 166). This means that you must:

• be solvent at all times, and
• have sufficient resources to meet your anticipated cash flow expenses.

For more information on these financial requirements, see RG 166.

Ongoing financial reporting

As a limited AFS licensee, your ongoing financial reporting obligations depend on whether you handle client money in connection with financial product advice or services, as illustrated in Table 1 below.

Table 1: Ongoing financial reporting requirements

If you do not handle any client money

If you do handle client money

You may lodge an annual compliance certificate through Form FS76 Limited Australian financial services licensee annual compliance certificate (FS76), rather than undertake an annual audit. You must still lodge financial statements (as required by sections 989B(1) and (2)). This means that you must lodge Form FS70 Australian financial services licensee profit and loss statement and balance sheet within the required timeframe.

You must lodge an auditor’s report in Form FS71 Auditor’s report for AFS licensee. You must lodge financial statements (as required by sections 989B(1) and (2)). This means that you must lodge FS70 within the required timeframe.

Advertising financial services

You must not make false or misleading statements or engage in misleading or deceptive conduct when offering or providing your financial services. For example, any advertisements for your financial advice services (including your website) should not create unrealistic expectations about what the service can achieve.

For more information on how we expect you to comply with your legal obligations when promoting your financial services, see Regulatory Guide 234 Advertising financial products and advice services (including credit): Good practice guidance (RG 234).

Where can I get more information?

• Limited AFS licensees – check whether you are a limited AFS licensee or a representative of a limited AFS licensee
• RG 175 AFS licensing: Financial product advisers – Conduct and disclosure
• INFO 274 Tips for giving self-managed superannuation fund advice
• INFO 228 Limited AFS licensees: Advice conduct and disclosure obligations, which explains what you need to do when you provide advice to retail clients (especially advice about SMSFs)
• INFO 257 ASIC reference checking and information sharing protocol
• Limited AFS licensees: Quick guide – this guide highlights some of the main obligations that apply when giving advice to retail clients under a limited AFS licence
• You can also contact us.

Important notice

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. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

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.