Introduction
Securing an Australian Financial Services Licence (AFSL) is a fundamental step for entities seeking to provide financial services in Australia. During the AFSL application process, the Australian Securities and Investments Commission (ASIC) may request applicants to furnish additional proof documents. This request for additional proofs is a part of ASIC’s comprehensive assessment of an AFSL application, ensuring applicants demonstrate their organisational competence and capacity to meet the obligations of an Australian financial services (AFS) AFS licensee and comply with regulatory requirements under the Corporations Act 2001 (Cth).
This guide aims to clarify why ASIC requests these additional proofs during the AFSL application process. It will provide applicants with essential information and practical guidance on understanding the purpose of these requests and what they need to do when ASIC asks for more proof documents to support their AFSL application, helping to ensure a smoother application process.
Understanding When ASIC Requests Additional Proofs
Complexity of Services and Products
ASIC may request additional proofs to complete their assessment of an AFSL application. The number and type of additional proofs depend on:
- The complexity of the financial services and products the applicant has applied for; and
- ASIC’s analysis of the applicant’s business and the market in which they intend to operate.
Analysis of Business and Market
In addition to the complexity of the financial services and products, ASIC’s analysis of the applicant’s business and the market they propose to operate in plays a significant role in determining whether additional proofs are necessary. This analysis helps ASIC to:
- Understand the nuances of the applicant’s business model; and
- Assess its potential impact on the financial services landscape.
Based on this comprehensive evaluation, ASIC decides if further documentation is required to ensure the applicant can meet their obligations as an AFS licensee and maintain ongoing compliance.
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The Purpose of Additional Proofs: What ASIC Seeks to Verify
Detailed Information Requirements
ASIC requests additional proofs to delve deeper into aspects of your AFSL application. These additional proofs serve to:
- Provide a more comprehensive understanding of your business operations; and
- Demonstrate your capacity to meet your obligations as an AFS licensee.
While core proofs are essential, they may not always offer the granular detail necessary for ASIC to make a fully informed assessment. Therefore, additional proof documents become necessary to supply this in-depth information, ensuring ASIC has a complete picture of your business and its preparedness for AFSL compliance.
Tailored to Your Specific Business
It is crucial that the additional proofs you provide are specifically tailored to your business and its unique context. Generic or outdated proof documents are unlikely to satisfy ASIC’s requirements. For instance, if your business operates as part of a larger corporate group, your proofs must clearly articulate how your specific entity will meet its AFS licensee obligations rather than providing standardised proofs applicable to the entire group. Providing proof documents that are not directly relevant to your business or are not current can lead to:
- Delays in the application process; and
- Potential rejection of the proofs altogether by ASIC.
Ensuring that your additional proofs are relevant and up-to-date will facilitate a smoother assessment of your AFSL application.
Types of Additional Proofs ASIC May Request
Part A Proofs: Entity and Licence Details
Part A additional proofs are related to the information you provide in Part A of the application form for your AFSL. These proofs are focused on gathering more details about your entity, the nature of your business, and the specific financial services and products you intend to offer under the AFSL.
The types of Part A proofs that ASIC may request include:
| Proof Number | Proof Name | Summary |
|---|---|---|
| A1 | Entity Details | Provides details about the legal structure of your business, such as names of partners, trustees, or a description of the entity’s nature and responsible managing persons for less common entity types. |
| A4 | Miscellaneous Financial Facility Statement | Requires a detailed description of unique financial products, a legal opinion supporting their classification (unless it’s a Managed Discretionary Account [MDA]), and an explanation of why they don’t fit established categories. |
| A4 | Membership of a Licensed Market | Requires evidence of membership in a licensed market or a licensed clearing and settlement facility, if your business involves market participation (e.g., brokers needing market membership). |
Part B Proofs: Demonstrating Licensee Capacity
Part B additional proofs are designed to assess your capacity to meet the obligations of an AFS licensee. These proofs delve into your organisational structure, compliance arrangements, and resources to ensure you can competently operate under an AFSL.
Examples of Part B proofs include:
| Proof Number | Proof Name | Summary |
|---|---|---|
| B2 | Development Program for Responsible Managers | Demonstrates how your responsible managers are fit and proper and maintain adequate skills and competence through training and development programs, including needs analysis and a training register. |
| B2 | Industry Standards Compliance | Provides evidence of an independent third-party assessment of your compliance with relevant industry standards and codes, along with the assessment results. |
| B3 | Compliance Arrangements | Outlines your compliance framework, including reporting lines, roles of compliance personnel, frequency of reviews, breach handling, and procedures for managing client funds. |
| B3 | Arrangements for Managing Conflicts of Interests | Describes your structural arrangements and procedures for identifying, assessing, controlling, avoiding, and disclosing conflicts of interest, and ensuring service quality is not compromised. |
| B3 | Outsourcing Statement | Details your processes for selecting and monitoring external service providers, ensuring outsourced activities meet your AFS obligations, including suitability assessments and written agreements. |
| B4 | Program for Monitoring, Supervision and Training of Representatives | Explains your supervisory framework for employees and authorised representatives, including reporting lines, review methods, handling of non-compliance, and ensuring authorised representatives act within scope. |
| B5 | Human Resources Capacity Statement | Describes your processes for ensuring adequate human resources, including recruitment strategies for skilled employees and succession planning, particularly for non-APRA regulated businesses. |
| B5 | Information Technology Capacity Statement | Details your IT resources and processes, including your IT strategic plan, disaster recovery plan, and IT systems functionality, demonstrating appropriate IT capacity for your business scale, for non-APRA regulated entities. |
| B6 | Dispute Resolution System Statement | Describes your internal dispute resolution procedures, compliant with ASIC Regulatory Guide 271, including complaint handling, timeframes, and referral processes to AFCA, and proof of AFCA membership. |
| B7 | Risk Management System Statement | Outlines your risk management strategy, aligned with AS ISO 31000:2018, including a risk management reporting lines diagram, risk reviews, and a table detailing identified risks and mitigation. |
| B8 | Compensation Capacity Statement | Provides evidence of your professional indemnity insurance, including a certificate of currency and policy details like coverage period, scope, cover amount, and exclusions. |
| B9 | Research Statement | Details your research processes for providing financial product advice, including needs assessment, product selection, list maintenance, and any software used, and how you manage remuneration and conflicts of interest. |
Part C Proofs: Complex Services and Products
Part C additional proofs are specifically related to complex financial services and products, often requiring more detailed substantiation due to their inherent complexity and risk. These proofs are triggered by your selections in Part C of the AFSL application form.
Examples of Part C proofs include:
| Proof Number | Proof Name | Summary |
|---|---|---|
| C1 | Custodial/Depository Service Statement | Details the nature of your custodial services, including client transaction processes, system descriptions, security measures, how MDA client assets are managed, and whether you meet the ‘incidental provider’ definition. |
| C1 | IDPS Statement | Describes how your investor directed portfolio service (IDPS) defines, holds, and protects IDPS property, especially if using a third-party custodian, detailing selection, segregation, and reporting structures. |
| C1 | Funds Under Management/Custody Statement | Outlines the anticipated growth of assets or funds under custody over the next five years, associated risks, and risk management strategies if providing custodial services. |
| C1 | Product/Service Distribution Statement | Describes the types of channels you intend to use to distribute products or services. |
| C2 | Scheme Operating Capacity Statement | Details the operation of your registered schemes, including scheme property nature, target market, legal titles, compliance structures, systems, and marketing approaches. |
| C2 | Scheme Property Statement | Describes how scheme property is defined, held, and protected when operating registered schemes, especially if using a custodian, including their selection, segregation, and reporting processes. |
| C2 | Funds Under Management Details | Describes the anticipated growth of assets or funds under management over the next five years, associated risks, and risk management strategies for scheme operations. |
| C2 | Product Distribution Channel Report | Describes the types of product or service distribution channels you intend to use for schemes. |
| C3 | Market Maker Statement | Details your market-making activities, client service purposes, risk disclosure, responsible manager supervision, transaction details, risk management controls, and breach procedures. |
| C4 | Derivatives Statement | Explains your activities with derivatives, including derivative types, product nature, target clients, risk disclosure, transaction details, client money handling, and internal controls for derivative positions and associated risks. |
| C5 | Foreign Exchange Operating Statement | Describes your operations with foreign exchange (FX) products, target clients, risk disclosure, transaction details, client money handling, and internal controls for FX positions and related risks. |
| C6 | Horse Racing Syndicate Statement | Details your compliance with ASIC Regulatory Guide 91 and ASIC’s instrument for horse racing schemes, including accounting systems and processes, and a letter from a Lead Regulator if required. |
| C7 | Life Insurance Capacity Statement | Describes your processes for preventing ‘churning’ or ‘twisting’ in life insurance and for monitoring and disclosing all types of commissions. |
| C8 | Underwriting Agency Capacity Statement | Provides details about your underwriting operations, including insurer names, agency agreements, risk recording processes, distribution channels, and premium handling procedures. |
| C9 | MDA Operator Capacity Statement | Explains how your MDAs are managed, including pro forma agreements, financial product details, trading discretion, client contribution methods, and client asset management. |
| C10 | Margin Lending Facilities Provider Statement | Details your processes for providing margin lending, including suitability assessments, margin call procedures, client notification processes, and ensuring clients understand non-standard risks. |
| C11 | Crowdfunding Service Statement | Describes how your crowdfunding platform adheres to regulations, including checks on offering company eligibility, CSF offer document compliance, investor protection measures, and handling of funds. |
| C12 | Insurance Claims Handling and Settling Service Statement | Details your processes for fair and efficient insurance claims handling, including timeframes, vulnerability support, code membership, conflict management, and representative training for claims handling services. |
| C13 | CCIV Operating Capacity Statement | Describes intended operations of your Corporate Collective Investment Vehicle, target investors, asset types, legal titles, accounting and operations systems, and marketing strategies. |
| C13 | CCIV Asset Statement | Details how CCIV assets are managed, held and protected, especially if using a third party to hold the assets. |
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Responding Effectively to ASIC’s Request: What You Need To Do
Adhering to the 10 Business Days Deadline
When ASIC requests additional proof documents to support your AFSL application, it is critical to respond promptly. Applicants must ensure that ASIC receives the requested proof documents within 10 business days of the date of the request. This timeframe is stipulated in ASIC Regulatory Guide 3 and adhering to it is essential for keeping your afsl application process moving forward efficiently. Failure to submit the additional proofs within this timeframe may result in delays to your AFSL application as the ASIC analyst will be unable to continue their review of the application until all requested information is provided.
Information to Include with Each Proof
To ensure efficient processing of your additional proof documents, it is important to include specific information with each document you submit to ASIC. Each additional proof document should be accompanied by the following details:
- Your name: Clearly state the name of the AFSL applicant.
- Application number: Provide the application number assigned to your afsl application by ASIC.
- Document name and relevant number: Clearly label each document with its name and the relevant proof number (e.g., ‘B2 proof: Development Program for Responsible Managers’).
- Date the proof was prepared: Indicate the date on which the additional proof document was prepared.
- Status (if applicable): If relevant, specify the status of the document, such as ‘Draft’ or ‘Commercial-in-Confidence’.
- Number of pages: State the total number of pages in the additional proof document.
Providing this information for each proof document will assist ASIC in correctly identifying and processing your submission as quickly and efficiently as possible.
Submitting Proofs via the ASIC MOVEit Portal
The primary method for submitting additional proof documents to ASIC is through the ASIC MOVEit portal. After you submit your AFSL application online, ASIC will send you instructions detailing how to access and use the portal to securely upload your documents. These instructions, including account details, will typically be sent to you via email shortly after ASIC receives your application.
If you are unable to access the ASIC MOVEit portal, alternative arrangements can be made to post the proof documents to ASIC. However, using the portal remains the preferred and more efficient method for lodgment.
Conclusion
Navigating the AFSL application process can be intricate, and understanding why ASIC requests additional proof documents is crucial for applicants. Responding effectively and promptly to these requests is essential to maintain the momentum of your AFSL application. By providing comprehensive and tailored additional proofs, applicants demonstrate their organisational competence and commitment to meeting the ongoing compliance obligations of an AFS licensee under the Corporations Act 2001 (Cth), thereby facilitating a smoother and more efficient review of their application by ASIC.
To ensure your AFSL application process is as seamless as possible, it is vital to understand ASIC’s requirements for additional proofs and to address them diligently. For expert guidance and support in preparing your AFSL application and responding to ASIC’s requests, book a free consultation with AFSL House today. Our AFSL application lawyers’ unparalleled expertise in Australian financial services licensing positions us to provide you with the specialised knowledge and proven solutions necessary to navigate the complexities of the AFSL application process successfully and efficiently.
