How to Vary Your Australian Financial Services Licence (AFSL)

Introduction

An Australian Financial Services Licence (AFSL) variation is needed when changes occur that impact the licence’s scope. These changes can range from offering new financial products or services to altering key personnel within the organisation. Understanding the variation process is crucial for maintaining compliance with ASIC’s regulatory requirements.

This guide will cover the process of varying an AFSL, including understanding when a variation is necessary, preparing the application, managing responsible manager changes, navigating ASIC’s assessment process, and finalising the variation. We will explore the required documentation, ASIC forms (FS03 and FS20), and what to expect after submission.

Understanding When to Vary Your AFSL

An AFSL must accurately reflect your current business activities and personnel arrangements. If your business undergoes significant changes, you may need to apply for a variation to your licence to remain compliant with ASIC’s requirements. Below are the key scenarios where a variation may be necessary, along with practical examples to illustrate when and why these changes are required.

1. Changes in Business Services or Products

A variation becomes necessary when you plan to expand or alter the financial services or products offered by your business. This ensures your licence authorisations align with your evolving business model and service offerings. Common scenarios include:

• Offering New Financial Products: For instance, if your current licence authorises you to advise on securities, but you wish to provide financial planning services or introduce a new financial product, such as a different type of managed investment scheme, a variation is required.
• Expanding Your Target Market: Shifting your target client base, such as moving from wholesale to retail investors, may also necessitate a variation to ensure your licence covers the additional compliance obligations associated with retail clients.
• Adding New Services: Introducing additional financial services, such as claims handling or portfolio management, that are not covered by your existing licence requires a variation.
• Evolving Business Models: Even seemingly minor changes, like altering your service delivery methods or introducing new revenue streams, may require a licence variation to ensure compliance.

It’s essential to regularly review your AFSL to confirm that all current and planned services and products are adequately covered by your authorisations.

2. Key Person Condition Changes

Key personnel play a critical role in maintaining your licence compliance, and changes to these individuals often require a variation to your AFSL. Key persons are typically responsible for ensuring your business meets ASIC’s organisational competence requirements, and their presence is often a condition of your licence. Variations may be necessary in the following situations:

• Departure of a Key Person: For example, if a responsible manager leaves your organisation, you must notify ASIC and apply for a variation to either amend the key person condition or appoint a replacement who meets the required qualifications and experience.
• Changes in Business Structure: If your business structure changes in a way that affects the roles or responsibilities of key personnel, such as a merger or internal reorganisation, a variation may be required to reflect these changes.
• Shifting Responsibilities: When the responsibilities of a key person shift significantly, such as taking on a different role within the organisation, you may need to update your licence conditions to reflect the new arrangements.
• Modifying Organisational Competence: If your business needs to adjust its organisational competence arrangements, such as appointing additional responsible managers to support new services, a variation is necessary to maintain compliance.

Key persons are integral to your ability to provide authorised services competently. Ensuring their roles and qualifications align with your AFSL conditions is critical to maintaining proper oversight and meeting ASIC’s requirements.

By proactively addressing changes in your business services, products, or key personnel, and applying for a licence variation when necessary, you can ensure your business remains compliant and avoids potential regulatory issues. 

Preparing Your AFSL Variation Application

When applying to vary your Australian Financial Services (AFS) Licence, it is essential to provide ASIC with the required documentation to demonstrate your business’s capacity to meet its regulatory obligations. The specific documents you need to submit depend on the nature of your variation. Below is a breakdown of the key requirements and considerations.

1. Required Core Proof Documents

Core proof documents are mandatory for all AFSL variation applications and provide ASIC with critical information about your business. The specific proofs required will depend on the type of variation you are seeking. For variations involving financial service or product authorisations, or key person conditions, the following documents must be submitted:

• Business Description (A5): This document offers a detailed overview of your business operations, including your organisational structure, the financial services you provide, your target client base, and your revenue sources. Including a detailed transaction example can strengthen this document and provide ASIC with a clearer understanding of your business model.
• Organisational Competence (B1): This proof demonstrates your business’s ability to competently provide financial services. It covers key areas such as compliance frameworks, risk management systems, and dispute resolution processes. Note that Foreign Financial Services Providers (FFSPs) varying a foreign AFSL are not required to submit this proof.

If your variation only relates to other licence conditions (and not authorisations), you are only required to submit the Business Description (A5). It’s important to ensure that these core proofs reflect all financial services and products under your AFSL, not just those affected by the variation.

2. Additional Supporting Documentation

In addition to the core proofs, ASIC may require additional supporting documentation depending on the specific authorisations you are seeking to vary. For example:

• If you are adding foreign exchange authorisations, you will need to prepare specific documents as outlined in ASIC Info Sheet 240.
• These additional proofs may relate to specific aspects of your business operations or the financial services you intend to provide.

Review ASIC’s guidance carefully to ensure you provide all necessary supporting documents tailored to your variation request.

3. People Proofs for Responsible Managers

If your variation involves adding new responsible managers, you must submit People Proofs for each individual. These documents allow ASIC to assess whether the new responsible managers meet the “fit and proper” requirements. The following proofs are required for each responsible manager:

• Statement of Personal Information
• National Criminal History Check (less than 12 months old)
• Bankruptcy Check (less than 12 months old)
• Copies of Qualification Certificates
• Two Relevant Business References (at least one must be external)

Further details on each of these proofs can be found further down in this guide.

It’s important to begin gathering these documents early, as obtaining a national criminal history check can take six weeks or more. These proofs must be submitted alongside Form FS20, which is used to update ASIC on changes to responsible manager details. Ensure all information provided is accurate and up-to-date to avoid delays in the application process.

By preparing your core proofs, supporting documentation, and People Proofs in advance, you can streamline the application process and reduce the likelihood of delays.

The Application Process

Varying your AFSL involves several steps, including completing the required forms, submitting supporting documents, and navigating ASIC’s assessment process. Below is a structured overview of the key stages to help you manage the process effectively.

1. Completing Form FS03

The first step in varying your AFSL is completing Form FS03, which is submitted online through the AFS licensee’s portal. This form requires you to:

• Specify the type of variation you are seeking:
  • Licence Authorisations (e.g., financial services, products, or client types).
  • Licence Conditions (e.g., key person conditions).
  • Or both.
• Confirm that you have the necessary systems and processes in place to support the new authorisations, just as you did during your initial AFSL application.
• Update the Table of Organisational Expertise for each responsible manager if the variation involves changes to key person conditions.

Completing Form FS03 accurately is critical, as it forms the foundation of your variation application.

2. Lodging Supporting Documents

Once Form FS03 is completed, you must submit the required supporting documentation through the ASIC MOVEit portal. These documents provide ASIC with the information needed to assess your application. Key requirements include:

• Core Proof Documents:
  • A detailed Business Description outlining your current and future services, products, client types, and organisational structure. Including a transaction example can help clarify your operations for ASIC.
  • A Fit and Proper Check for all fit and proper persons, including responsible managers, directors, secretaries, and senior managers.
• Alignment with ASIC Registers: Ensure all submitted records align with ASIC’s registers to avoid discrepancies that could delay the application process.

Providing accurate and complete documentation is essential to ensure your application progresses smoothly.

Managing Responsible Manager Changes

Using Form FS20

Form FS20 is the key document for managing changes to responsible managers on your AFSL. When adding or removing responsible managers during a variation, you must submit Form FS20 through the AFS licensees portal alongside your variation application. This form allows you to update responsible manager details, including their qualifications, experience, and contact information.

Documentation Requirements

When adding new responsible managers, several essential documents must be submitted to ASIC:

• Statement of Personal Information: A comprehensive document where the responsible manager accepts their nomination and provides detailed background information about their experience and qualifications

• Criminal History Check: A national criminal history check less than 12 months old must be provided for each new responsible manager

• Bankruptcy Check: A current bankruptcy check dated within the last 12 months is required to demonstrate financial standing

• Qualification Certificates: Copies of relevant educational qualifications that demonstrate the responsible manager’s technical competence

• Professional References: Two business references attesting to the responsible manager’s financial services experience, with at least one reference from someone external to their current organisation

All People Proofs documentation must be scanned and emailed to ASIC’s dedicated address for FS20 proofs. It’s important to note that obtaining national criminal history checks can take six weeks or longer, so these should be requested well in advance of submitting Form FS20.

After Submission

Once you have submitted your AFSL variation application, ASIC begins its assessment process. This phase involves a thorough review of your documentation and may require additional input from you to ensure your application meets all regulatory requirements. Below is a structured overview of what to expect and how to respond effectively.

1. ASIC’s Assessment Process

ASIC typically takes four to six months to assess an AFSL variation application, although more complex applications may require additional time. The assessment process consists of two key stages:

• Completeness Check:
  ASIC first conducts a review to ensure all required documentation is present and acceptable. To pass this initial review, your application must include:
  • Properly prepared core proof documents.
  • Payment of the correct application fee.
• Detailed Assessment:
  Once the application passes the completeness check, ASIC assigns it to a licensing analyst for a more detailed review. The level of scrutiny during this phase depends on your business model and the market context. During this stage, ASIC may request additional information or documentation, such as:
  • Updated Financial Statements: To demonstrate your current financial position.
  • Cash Flow Projections: To show your ability to sustain the new financial services.
  • Professional Indemnity Insurance Details: To confirm adequate coverage for the expanded scope of your licence.
  • Additional Proof Documents: Specific to certain authorisations being sought.

ASIC’s assessment is thorough and aims to ensure that your business is fully equipped to meet its regulatory obligations under the varied licence.

2. Responding to ASIC Queries

If ASIC requests additional information during the assessment process, it is crucial to respond promptly and thoroughly to avoid delays or complications. To ensure a smooth process, you should:

• Address All Questions Comprehensively: Provide detailed and accurate responses to all of ASIC’s queries, ensuring you meet any specified timeframes.
• Provide Clear Explanations: For any complex aspects of your business model or operations, offer clear and concise explanations to help ASIC understand your application.
• Submit Complete and Tailored Documents: Ensure all additional documents are accurate, complete, and tailored to your specific circumstances.
• Maintain Open Communication: Keep communication lines open with ASIC throughout the assessment process to clarify any uncertainties or provide updates as needed.

Failure to respond adequately to ASIC’s requests may result in your application being assessed based on incomplete information, which could lead to delays or even refusal of your variation application.

Finalising Your Variation

Once ASIC has reviewed and approved your AFSL variation application, there are final steps you must complete to formalise the process. These steps include reviewing the draft licence and addressing any outstanding requirements outlined by ASIC. Below is a structured overview of what to expect and how to proceed.

1. Draft Licence Review

When ASIC decides to grant your AFSL variation, they will issue a draft varied licence for your review. This document outlines the updated authorisations and conditions that will apply to your licence. To finalise this stage:

• Carefully Review the Draft Licence: Ensure that all authorisations and conditions accurately reflect the changes you requested in your variation application. Pay close attention to any specific wording or limitations that could impact your operations.
• Sign and Return the Consent Notice: The draft licence will be accompanied by a consent notice, which you must sign and return to ASIC to formally indicate your acceptance of the varied licence terms.

This step is critical to confirm that the varied licence aligns with your business needs and regulatory obligations.

2. Addressing Outstanding Requirements

Before ASIC issues your final varied licence, they will send you a requirements letter outlining any outstanding matters that need to be resolved. These requirements may include:

• Providing Updated Professional Indemnity Insurance Details: Ensure your insurance coverage aligns with the new authorisations granted under your varied licence.
• Confirming No Material Changes: Verify that there have been no material changes to the information provided in your variation application since its submission.
• Submitting Additional Documentation: Provide any additional documents requested by ASIC to support your expanded services, such as updated compliance policies or operational procedures.
• Demonstrating Financial Adequacy: Show that your business has adequate financial resources to support the new authorisations and expanded scope of services.

It is essential to address these requirements promptly. If matters remain unresolved for an extended period, ASIC may withdraw their offer of a varied licence.

3. Communicating with ASIC

If you encounter difficulties meeting any of the outstanding requirements, it is important to contact ASIC immediately to discuss your situation. Open communication can help clarify expectations and potentially negotiate extensions or alternative solutions to meet their requirements.

Conclusion

Varying an AFSL requires careful preparation and attention to detail throughout the application process. Understanding the requirements, preparing comprehensive documentation, and maintaining open communication with ASIC are essential elements for a successful variation. A well-planned approach that addresses all regulatory requirements while anticipating potential challenges can help streamline the process.

For guidance and support in navigating the complexities of the AFSL variation process, AFSL holders are encouraged to connect with our AFSL lawyers at AFSL House. We offer expertise in preparing variation applications, managing responsible manager changes, and ensuring compliance with ASIC’s requirements, helping you adapt your license to meet your evolving business needs while maintaining regulatory compliance.

Frequently Asked Questions

Disclaimer: All information provided in this article is strictly general in nature and is not intended to be, nor should it be relied upon as, legal advice.