Consultation on new ASIC licensing and enforcement powers

Treasury has released for consultation draft legislation to implement recommendations of the ASIC Enforcement Review Taskforce Report relating to licensing, banning orders, search warrants and access to telecommunications intercept material.

The draft legislation:

  • Grants ASIC new powers in relation to the variation and cancellation of Australian Financial Services Licences and Australian Credit Licences;
  • Strengthens ASIC’s licensing powers by replacing the AFS License requirement that a person be of ‘good fame and character’ with an on-going requirement that they be a ‘fit and proper person’;
  • Aligns the penalties for false and misleading statements in AFS and Australian Credit License applications;
  • Extends ASIC’s powers so that they may ban a person from performing functions in a financial services or credit business. The legislation also expands the grounds on which ASIC can issue banning orders;
  • Harmonises ASIC’s Search Warrant powers across different Acts and brings them into line with the search warrant powers in the Crimes Act;
  • Allows interception agencies to provide lawfully intercepted information to ASIC for serious offences that ASIC can investigate or prosecute.

Licensing changes

Under the draft bill:

  • ASIC may suspend or cancel an AFS licence if the licensee does not provide a financial service within 6 months of the licence being granted, or if the licensee ceases to carry on a financial service business;
  • An AFS licensee or credit licensee who requests a variation of their licence must satisfy the fit and proper person test in order for ASIC to grant a varied licence;
  • ASIC may vary or revoke an AFS licence or credit licence if it is no longer satisfied that the licensee, its officers, or controllers no longer satisfy the ‘fit and proper person’ requirement;
  • An AFS licensee or credit licensee must notify ASIC of a change of control within 30 days of the change. A failure to notify ASIC of a change in control is an offence of strict liability.

ASIC’s existing powers in the AFS licensing regime do not provide for suspension or cancellation if the licensee does not provide the financial services that have been authorised.

The Taskforce found that this provides an opportunity for entities to ‘warehouse’ and commoditise AFS licences. In practice, an entity is able to apply for a licence without any intention of commencing activities authorised by the licences. The intention is to sell the licences to persons who may not always meet the requirements to hold an AFS or credit licence.

The amendments specifically provide that where a licensee makes a variation request, ASIC must apply the fit and proper test, in a similar manner to a licence application. That is, ASIC must have no reason to believe that the licensee and the controllers are not fit and proper having regard to the factors described above.

The amendments to the variation provisions also align with the amendments to the original licence application process, that is, provide ASIC with the power to request information from controllers, confirm that there have been no material changes to the information provided by the licensee before the variation is granted and deem withdrawal of the variation request if the licensee does not provide information that is requested by ASIC.

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