Provider licensing
Purpose: to give investors the same consumer protection, no matter where they're turning for financial services.
Updated as at 11 March 2004.
In general, all financial services providers need an Australian Financial Services Licence (AFSL) under FSR whether they're dealing with retail or wholesale clients. (This has replaced the pre-FSR system of separate licences for securities dealers and investment advisers, futures advisers and brokers, general and life insurance brokers and foreign exchange dealers.)
- Do I need a licence?
- How does the licence system work under FSR?
- How does FSR deal with representatives?
Do I need a licence?
You may need a licence if you:
- provide financial product advice;
- deal in a financial product;
- make a market in a financial product;
- operate a registered managed investment scheme; or
- provide a custodial or depository service.
How does the licence system work under FSR?
The AFSL is issued by ASIC, which ensures that licensees have appropriate skills, financial resources and compliance systems. For more, see ASIC's policies and eLicensing kit on its website.
To get an AFSL, you have to go through a stringent application process. ASIC will impose licence conditions to ensure continuing compliance.
Licensees have extensive obligations, either under their licence conditions or specific legislative provisions, particularly if they deal with retail clients. They cover such areas as dispute resolution, professional indemnity insurance and the training and supervision of any representatives.
ASIC maintains a register of licensees, authorised representatives and declared professional bodies. This reduces the amount of information licensees are required to keep.
How does FSR deal with representatives?
FSR contemplates that the financial services provided by a licensee will be carried out by its representatives. They may be its employees or directors, or employees or directors of its related bodies corporate, other authorised representatives and other people acting on the licensee's behalf.
Under FSR, the licensee is liable for the acts and omissions of its representatives. Where a person is a representative of more than one licensee (for example, in the case of insurance multi-agents), the licensees can be jointly and severally liable for the representative's conduct, unless steps are taken to quarantine liability.
People acting as representatives of a licensee (other than employees and directors of it and related companies, who are automatically authorised to act) must be appointed as "authorised representatives". Bodies corporate can be appointed as authorised representatives, as well as natural persons. Licensees cannot be authorised representatives of other licensees, except in the case of a licensee appointed as a representative of an insurer under a binder.
Licensees must train, supervise and monitor their representatives. The level of training required for representatives is set out in ASIC Policy Statement 146.
