ASIC checks on limited AFS licence experience

The Australian Securities and Investments Commission (ASIC) stated that it visited twenty limited Australian Financial Services (AFS) licensees during 2016 - 2017 to assess how they were operating under their new licences and to discuss and promote compliance with their AFS licensee obligations. This program followed the removal from 1 July 2016 of the exemption from holding an AFS licence that accountants previously relied upon when giving advice about self-managed super funds (SMSFs).

Each licensee was asked about their business model and provided valuable information about how the new limited AFS licensing regime was operating in practice.

Although most of the licensees were still establishing their businesses under the new regime, many indicated the provision of financial advice was not a large part of their business. Only half the licensees had provided advice at the time of our visit.

Areas of concern identified during the visits included:

  • uncertainty around ongoing compliance obligations - the licensees were uncertain about the resources required to monitor compliance and what steps were required to comply with their general licensee obligations;
  • confusion about what information needs to be uploaded to the Financial Adviser Register (FAR) - nearly half the licensees had not updated the FAR with adviser information; and
  • where licensees had not yet provided advice about SMSFs they were uncertain about what documents need to be provided to clients, the content of those documents and when they had to be provided to clients - this include the requirements around giving a statement of advice, a key document.

The licensees ASIC visited indicated they were actively seeking training and assistance on a number of aspects of the AFS licence regime. In light of the findings from this project, ASIC will provide additional education resources for limited AFS licensees, particularly around their ongoing compliance obligations and client engagement. ASIC will shortly provide further guidance on its website on areas of uncertainty highlighted by the visit program.

ASIC will also contact limited AFS licensees who have no advisers recorded on FAR to remind them of their obligations in relation to the register. Limited AFS licensees who have not recorded any advisers on FAR are likely to be in breach of the law.

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