Introduction
Suspending your Australian Financial Services Licence (AFSL) is a critical measure for licence holders who are temporarily unable to fulfil legal obligations or maintain organisational competence. This suspension ensures that your financial services business remains compliant with regulatory standards while addressing internal challenges.
Understanding the suspension process is essential for AFSL holders to effectively manage their licence status and mitigate potential risks. This guide provides an overview of the reasons for suspending an AFSL, the procedural steps involved, and the ongoing obligations during the suspension period.
Understanding AFSL Suspension
What is an AFSL Suspension?
A voluntary AFSL suspension involves temporarily halting the operations of an AFSL holder, restricting them from providing financial services during the suspension period. Unlike licence cancellation, which is permanent and requires restarting the licensing process, suspension is reversible, allowing the licence to be reinstated once the issues leading to the suspension are resolved. Please note that a voluntary AFSL suspension is distinct from an AFSL suspension imposed by ASIC as an enforcement measure.
When to Consider Suspending Your AFSL
AFSL holders should consider suspending their licence under specific circumstances to maintain compliance and manage operational disruptions effectively. Common scenarios include the temporary unavailability of a key responsible manager, which prevents the licensee from meeting organisational competence requirements, or situations where the licensee is unable to comply with legal requirements or licence conditions. Suspending the licence in these cases ensures that the business remains compliant with the Corporations Act 2001 (Cth) and avoids potential enforcement actions by the Australian Securities and Investments Commission (ASIC).
Get Your Free Initial Consultation
Consult with one of our experienced AFSL Lawyers today.
Reasons for Suspending Your AFSL
Unavailability of a Key Responsible Manager
If a key responsible manager within your financial services business becomes temporarily unavailable, it may impede your ability to satisfy the organisational competence requirements mandated for your AFSL. This situation can necessitate the suspension of your AFSL to maintain compliance with regulatory standards set by ASIC.
Inability to Comply with Licence Conditions
Occasionally, AFSL holders may encounter circumstances that prevent them from adhering to specific licence conditions or legal requirements. These could include significant changes in financial services operations or regulatory mandates that are temporarily unmanageable. In such cases, suspending your AFSL is an appropriate measure to address compliance issues while allowing time to rectify the deficiencies.
The Suspension Process
Completing the Suspension Request Form
To initiate the suspension of your AFSL, you must complete the request for suspension form provided by ASIC. Ensure that you fill out all relevant sections of the form accurately to avoid delays in processing your request.
Writing the Covering Letter
Alongside the suspension request form, a comprehensive covering letter is required. This letter should clearly outline the details and reasons for your suspension request. The covering letter must include the following information:
| Information to Include | Description/Purpose |
| Your Licence Number | Clearly state your AFSL number. |
| Suspension Request | Explicitly indicate that you are formally requesting ASIC to suspend your AFSL. |
| Suspension Period | Specify the exact duration (start and end dates, or a defined period) for which you wish the licence to be suspended. |
| Reason(s) for Suspension | Provide detailed explanations for the suspension request. Examples include the temporary unavailability of a key responsible manager or inability to currently comply with specific licence conditions. |
| Related Bodies Corporate | If applicable, include details of any related entities regulated by the Australian Prudential Regulation Authority (APRA), their ACN or ABN, their current APRA regulatory status, and an explanation of whether their activities will be affected by the suspension. |
| Managed Investment Schemes | If you act as the responsible entity for any managed investment schemes, provide details of those schemes. |
| Unresolved Disputes | Mention any internal or external disputes (e.g., with clients or other parties) that have not yet been fully resolved. |
| Notification Preferences | State whether you consent to receiving official notices regarding the suspension via email and provide a valid email address if you agree. |
| Postal Address | Provide a valid physical postal address where ASIC can send official documents. |
| Third-Party Authorisation (if applicable) | If you have engaged a third party to assist with the suspension process, indicate this and include a separate letter authorising them to act on your behalf. |
If you have engaged a third party to assist with the suspension process, include a letter authorising them to act on your behalf.
Once your suspension request and covering letter are complete, submit them along with the necessary fee to ASIC either via email or by mailing them to the provided address.
Speak with an AFSL Lawyer Today
Request a Consultation to Get Started.
Conditions and Obligations During Suspension
Maintaining Professional Indemnity Insurance
As a condition of suspending your AFSL, it is likely that you will be required to maintain Professional Indemnity (PI) insurance. This insurance protects your business against potential claims of professional negligence during the suspension period, ensuring that you remain compliant with regulatory requirements.
Membership in the AFCA
During the suspension of your AFSL, maintaining membership with the Australian Financial Complaints Authority (AFCA) is also typically required, especially if you have been providing services to retail clients. AFCA membership ensures that your clients continue to have access to a recognised external dispute resolution scheme, facilitating the resolution of any complaints that may arise during the suspension.
Financial Obligations During Suspension
Even with a suspended AFSL, certain financial responsibilities remain to ensure you meet regulatory requirements and facilitate a smoother potential reinstatement. This section outlines the specific obligations you need to be aware of.
Lodging Financial Statements and Auditor’s Reports
Even with a suspended AFSL, you are required to continue submitting your financial statements and auditor’s reports for specific periods. This involves:
- Financial years ending before suspension: You must submit Form FS70 and Form FS71 for any financial year that concluded prior to the official suspension date of your licence.
- Financial years during suspension: Importantly, you will likely be required to lodge financial statements and an auditor’s report for any financial year that occurs entirely or partially during your suspension. This is often a condition explicitly linked to the suspension.
- Potential requirement for an additional year: If your suspension request is lodged near the end of a financial year, ASIC might not finalise the suspension until the following financial year. In that case, you would need to lodge the necessary financial reports for that additional financial year too.
To summarise your lodgement requirements:
- Financial years that ended before your suspension.
- Financial years that occurred during your suspension.
- Potentially, the financial year in which the suspension is finalised, if it’s different from the year you requested it.
Ongoing Fee Payments
Managing and promptly paying associated fees is essential for a smooth suspension process. This includes two main types of fees:
- $899 Initial Suspension Fee: Once you submit your request to suspend your AFSL, ASIC will send you a fee invoice. It’s crucial to understand that this $899 fee must be paid fully before your suspension can be officially processed. This administrative fee covers the initial work needed to implement the suspension.
- Possible Ongoing Administrative Fees: Although not directly mentioned initially, it’s important to know that maintaining your licence during the suspension period might involve additional fees to cover ASIC’s ongoing administrative and regulatory oversight. Think of this as covering the costs of keeping your suspended licence on file and monitoring its status.
Failing to pay these fees on time can cause significant delays or even complications in your suspension process. This could ultimately affect your ability to reinstate your licence when the suspension period ends. Therefore, proactively managing and paying all related fees is vital for maintaining your suspension and meeting your obligations as a current or former AFSL holder.
Settling Outstanding Debts
Beyond the fees specific to the suspension process, it’s also vital to remember that you must pay any amounts you owe to ASIC. This includes any outstanding levies, penalties, or other financial obligations at the time of your suspension request. Resolving these debts is a necessary step for a successful suspension and any future attempts to reinstate your licence.
Get Your Free Initial Consultation
Consult with one of our experienced AFSL Lawyers today.
After Submitting the Suspension Request
ASIC’s Assessment of Suspension Request
After submitting your suspension request, ASIC will assess it to ensure there are no outstanding matters that could prevent the suspension of your licence. To expedite this process, ensure that all relevant sections of the suspension request are fully completed and that any required actions are finalised before submission.
Notification and Publication of Suspension
Once your suspension request is approved, ASIC will notify you by sending a formal letter confirming the suspension of your AFSL. Additionally, ASIC will publish a notice of the suspension in the ASIC Gazette, ensuring that your licence suspension is publicly recorded.
Conclusion
Suspending your AFSL is a vital measure for licence holders who encounter temporary challenges in fulfilling their legal obligations or maintaining organisational competence. By following the correct suspension procedures, AFSL holders ensure their financial services business remains compliant with regulatory standards, thereby avoiding potential enforcement actions by ASIC.
Properly suspending your AFSL when necessary offers significant benefits, including the ability to address internal issues without facing the irreversible consequences of licence cancellation by ASIC. For guidance and support in navigating the AFSL suspension process, AFS licensees can connect with our experienced AFSL lawyers at AFSL House. We offer AFSL compliance & regulatory expertise in managing these transitions and can help you understand the necessary steps to ensure 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.
