Obtaining an Australian Financial Services license can seem a daunting task. If you are considering obtaining a license, the following provides an insight into the preparation needed for the licensing process for the general and life insurance sector. 1
1. What authorisations do I need on my license?
- What financial products will be offered?
- Will you deal or provide advice for these financial products, or both?
- Will you be the product issuer?
- Will you be offering products under a delegated authority?
- Will offer products to retail or wholesale clients, or both?
2. Who will be the nominated Responsible Manager/s?
A great deal of emphasis is placed on the persons you nominate as Responsible Managers. They must have the requisite experience, skills and knowledge (Qualifications) to cover the authorisations being selected.
It is preferable for a business to have two or more Responsible Manager however there are circumstances where this may not be possible. If ASIC determines there is a heavily reliance on one or more Responsible Managers to cover the selected authorisations, they may impose a Key Person provision on the license. If you think this may be the case, please contact us.
An often held misconception is that a Responsible Manager must be a director. This is not the case. To be more precise ASIC state ‘…You should only nominate someone as a Responsible Manager if they are directly responsible for significant day-to-day decisions about the ongoing provision of financial services…’ An example in the insurance industry could be a senior broker or underwriter with responsibility for client services.
All nominated Responsible Managers will be required to submit:
- A current Police Check
- A Current Bankruptcy Check
- Curriculum Vitae
- Two Reference in a specific format
3. What information do I provide ASIC with my application?
When a license application is submitted it must be accompanied by ‘Proof Documents’. Initial proof documents required for an AFS application are:
- A5 Business Description Information
- B1/B2 Organisational Competence – Responsible Managers, together with their supporting documentation
- B5 Financial Resources Statement
If you are seeking to be authorised for issuing contracts of insurance under a delegated authority, then include a:
- C8 Underwriting Capacity Statement
During the assessment process, ASIC may request additional information on how you intend to manage the following areas of your business. There are several proofs and these include:
- B3 Compliance Arrangements
- B3 Conflicts of Interest
- B3 Outsourcing statement
- B4 Monitoring and Supervision of Representatives
- B5 Human Resources Statement
- B5 IT Capacity Statement
- B6 Disputes Resolution Statement
- B7 Risk Management Statement
- B8 Compensation Capacity Statement
- B9 Research Statement
- C5 Operating Statement
4. The Licensing Process
Obtaining a license can be a lengthy process. The following diagram shows the general process involved in obtaining a license, including ongoing obligations. On average the process takes around three months however it can take much longer. In other words, it would be wise to clearly establish when you want to the license to commence.
Before the license is granted, you will be required to confirm compensation arrangements are in place and membership to External Disputes Resolution scheme.
5. After obtaining your Australian Financial Services license
Having obtained your license it is important to understand your ongoing obligations. ASIC expects you will have in place a robust compliance regime, contextualised the size and complexity of your organisation.
1 If you are seeking authorisations outside the insurance sector, please contact FinServ to discuss your specific requirements