AFSL: Australian Financial Services Licence is a legal license provided by the ASIC (Australian Securities and Investments Commission). AFSL compliance offers support to those who own an Australian Financial Services Licence to prepare all the required compliance documents. Any financial service businesses in Australia must have an AFSL unless they have a particular reason to not have one, like a limited license or because of a specific provision.
To procure AFSL, the financial service business in question must apply to the Australian Securities and Investments Commission with the required documents. After an assessment, the ASIC issues AFSL under Chapter 7 of the Corporations Act 2001.
AFSL is only issued to competent applicants and can carry out their specified business to the best of their ability. The applicant should also have the resources necessary to carry on the company. The applicant should also meet the other obligations such as training, AFSL compliance, insurance, etc., that one expects of an AFS licensee. They should also be able to maintain these standards. They should also have necessary risk management systems and should also be able to follow compliance to obligations. The applicant should also have trained representatives who can provide competent financial services and enable the applicant to follow HR obligations. If the applicant can meet all these standards, they are issued an Australian Financial Services Licence. But one should keep in mind that having this license is not a guarantee of the quality of the business’s services.
Having an Australian Financial Services Licence authorizes the business to provide financial advice to their clients and help in financial planning. It allows them to deal in a product and make a market for that financial product. Any business that holds an AFS license can also provide custodial and trustee company services. They can also operate a registered scheme. Any business that deals with these kinds of financial advice and product-based business are legally required to hold an AFS license, especially those involved in the accounting sector.
Whenever a business holding an AFS license hires new financial advisers or an adviser leaves the company, they must update it on the ASIC’s website. They are also required to do the same if any of the employee’s details are changed—for example, their names, qualifications, and products on which they advise.
Any business that breaches its license conditions or engages in financial services and planning to clients without a license can be fined and penalized by the Australian Securities and Investments Commission. If a business that already holds AFSL is routinely incompetent, it faces the risk of canceling its license by the ASIC. One does this to protect the consumers and uphold the integrity of the financial service sector. In case a business is liquidated, the ASIC can cancel or suspend the business’s license.
It is also important to note that having an AFS license does not mean that the Australian Securities and Investments Commission (ASIC) endorses the specified business or product. No affiliation to ASIC should be implied in any way by the company, such as using the ASIC logo or indicating in any other way that ASIC endorses that business and its services. Any business found to be suggesting this runs the risk of being penalized. Companies that hold an AFS license should also make sure they only offer the service issues in their license, as dealing with any unverified services will lead to the removal of their issued license.
These are the basics of AFSL that any financial service business should know.