ASIC has published Report 478 Overview of licensing and professional registration applications: July to December 2015 (REP 478) setting out its recent regulatory outcomes in relation to Australian financial services (AFS) licence applications, Australian credit licence applications, liquidator registration applications, company auditor and approved SMSF auditor registration applications.
For 1 July to 31 December 2015:
•ASIC assessed approximately 1,879 applications, with 35% relating to a new licence application and the remaining 47% relating to variations to existing licence; 18% related to professional registration (liquidators and auditors)
•Of the total number of applications assessed, 47% of these related to an Australian financial services (AFS) licence and 35% related to an Australian credit licence
•36% of all applications assessed during this period were approved
•57% of those approved were in a form other than as requested by the applicant (with 71% of these relating to an AFS licence and 46% related to a credit licence)
•Nine AFS licences were suspended, 98 AFS licences were cancelled and 192 credit licences were cancelled.
In assessing an application ASIC might:
(i) impose a key person requirement, require a compliance consultant to be appointed, require the appointment of an additional responsible manager, or tailor a special condition to limit the scope of the activity authorised under the licence; or
(ii) approve a range of financial services or financial products that the applicant is allowed to offer that is narrower than that applied for.
The Report notes that in most cases, when an applicant for an AFS or credit licence withdrew their application during the assessment they were unable to demonstrate that a nominated responsible manager had the required competence regarding an authorisation being sought, without which the proposed financial services or credit business cannot operate.
ASIC refused applications for a range of reasons, including because:
(a) the applicant provided false or misleading information to ASIC on a number of occasions during ASIC’s assessment of the application;
(b) ASIC was not satisfied that the applicant’s risk management systems were adequate;
(c) ASIC was not satisfied that the applicant’s organisational competence (as set out in RG 105) was adequate based on the nominated responsible manager; and
(d) ASIC was not satisfied the applicant would not contravene its licence obligations under s912A of the Corporations Act.
New areas of focus
In the fintech market, marketplace lending (or peer-to-peer lending) has been one of the most active areas for licensing inquiries and applications. During the relevant period, ASIC received 11 applications, and finalised its assessment of six applications, when the applicant sought authorisations to offer one or more activities associated with marketplace lending.
During the relevant period, ASIC granted two AFS licences to digital advice providers.
ASIC has commenced work on revising its licensing technology portal to enable applications seeking crowd-sourced funding AFS licence authorisation to apply when the legislation comes into force.
The report notes a number of cases where ASIC’s Licensing team has detected serious issues reflecting a poor culture and attitude towards compliance. Instances include, for example, where an applicant provided ASIC with information in support of an AFS licence application that was false and/or misleading.
Even if a licence application is refused, ASIC may still take further regulatory action, including criminal action against the applicant, its directors or controllers. If a licence is granted in circumstances where ASIC’s assessment was based on materially misleading information, ASIC will seek to have the licence cancelled.
The Licensing team aims to:
(a) decide whether to grant or vary 70% of AFS or credit licence applications within 60 days of receiving a complete application; and
(b) decide 90% of complete applications within 120 days.