Australian Securities and Investments Commission (ASIC) today published its third report on its approach to licence applications. The six month report from July to December 2015 sets out recent regulatory outcomes achieved by ASIC in relation to Australian financial services (AFS) applications, Australian credit licence applications, liquidator registration applications, company auditor and approved SMSF auditor registration applications.
The report is part of ASIC’s ongoing commitment to providing greater public information about its regulatory activities. ASIC’s first licensing activity report was published in May 2015. You can read about relevant FX license reports down below, after the brief overview of all activity.
ASIC Deputy Chairman Peter Kell
ASIC Deputy Chairman Peter Kell said: “ASIC is seeking to ensure that there is a robust compliance culture in place when businesses set up or vary their licence. We are continuing to pay close attention to licence applications in the areas of retail OTC derivatives and limited licensing. ASIC also has a focus on licensing issues in the broader fintech sector, including marketplace lending, digital (robo) advice and crowd sourced funding.”
“The results in our report indicate the importance of maintaining high standards, given the significant impact a licence holder may have on a consumer’s financial well being,” Mr. Kell concluded.
For 1 July to 31 December 2015:
- ASIC assessed approximately 1,879 applications, with 35% relating to a new licence application and the remaining 47% relating to variations to existing licence; 18% related to professional registration (liquidators and auditors)
- Of the total number of applications assessed, 47% of these related to an Australian financial services (AFS) licence and 35% related to an Australian credit licence
- 36% of all applications assessed during this period were approved
- 57% of those approved were in a form other than as requested by the applicant (with 71% of these relating to an AFS licence and 46% related to a credit licence)
- Nine AFS licences were suspended, 98 AFS licences were cancelled and 192 credit licences were cancelled, and
- ASIC assessed 369 applications for professional registration as liquidators and auditors.
ASIC stated there is additional novelty and complexity associated with various categories of licence applicants (including OTC and FX applicants and fintech startups)
Breakdown of Retail FX OTC derivatives activity:
- During the relevant period, 30 applications were lodged seeking authorisation to deal by ‘issuing’ over-the-counter (OTC) derivatives and/or foreign exchange (FX) contracts to retail clients. Of these, five also sought the make-a-market authorisation for OTC derivatives and/or FX contracts.
- ASIC is aware that some corporate groups are seeking AFS licences in order to give the public appearance that services provided by non-licensed entities in the group are regulated by ASIC. Often these entities will use foreign incorporated unlicensed entities with similar names to an Australian licensee. Examples include FIBO Group Limited and Trading Point of Financial Instruments Limited.
- ASIC understands that some participants may be interested in obtaining an AFS licence with OTC and FX licence authorisations by acquiring entities that already hold such authorisations. The regulator is concerned that some of these persons are resorting to this option as a way of circumventing ASIC’s assessment of their competency or appropriateness to hold a licence.
- ASIC stated it would like to remind participants that having organisational competence and responsible managers and officers who are of good fame and character are continuing obligations for all AFS licensees. If the regulator becomes aware of a change of control in circumstances that raise such concerns, it will consider taking appropriate action, including seeking a suspension or cancellation of the licence.
ASIC Commissioner Greg Tanzer also warned prospective purchasers of entities that hold AFS licences that:
Licensees will not be absolved of their obligations, including those relating to previous or ongoing breaches by a change in control or ownership. Any prospective new owners and managers should ensure they conduct adequate due diligence before acquiring a licence and assume responsibility of the licensees obligations.
ASIC states that the most common AFS licence condition it continues to impose is the key person condition. If an AFS licensee is heavily dependent on the competence of one or more responsible managers (e.g. where the licensee has a sole responsible manager), we will generally impose a ‘key person condition’, and require that these persons are named on the licence as a key person. If a named key person leaves, the licensee must apply for a variation, as it will no longer be able to comply with that condition of the licence
To download the activity report click here (PDF).