What is AFS Licence?

 

Australian Financial Services Licence (AFSL) is a legal licence provided by the Australian Securities and Investments Commission (ASIC) enabling the operation and activities of Australian Financial services Businesses.

If you work for a financial company and make money for the company through the provision of financial services, you will need to obtain a AFS Licence. It is a legal requirement to obtain an AFSL from the day business operations begin.

 

Why is an AFS Licence important?

 

Lately we have been seeing news pertaining to Crypto Currency companies going into liquidation and share traders being investigated for providing stock tips without a license. This can be worrisome to investors.

Whilst Crypto Currency is currently unregulated and there is no protection for consumers, the ASX is heavily regulated and companies and their representatives must work under the umbrella of a Financial Services License. Having a licence does not guarantee that companies or their representatives will provide good and accurate advice it does give investors some security in that there is a set of standards to comply with and avenues of recourse for consumers.

 

Requirement for an AFSL

 

The following extract from ASIC provides information on who must have a Financial Services License. An AFS licence authorises you and your representatives to provide financial services to clients.

You provide financial services if you:

  • Provide financial product advice to clients for example, giving a recommendation to clients or the general public about which financial product they should purchase.
  • Deal in a financial product for example, buying or selling shares on behalf of a client or issuing interests in a managed investment scheme.
  • Make a market for a financial product for example, where you regularly quote prices at which people can buy or sell financial products.
  • Operate a registered managed investment scheme. ASIC is also required to register managed investment schemes that are offered to retail clients.
  • Provide a custodial or depository service for example, holding a financial product, or a beneficial interest in a financial product on trust for a client.
  • Provide traditional trustee company services for example, preparing estate management functions.
  • Provide a crowd funding service.
  • Provide a superannuation trustee service, or
  • Provide a claims handling and settling service.

Financial products include things such as shares, bonds, superannuation, interests in managed investment schemes, life insurance, general insurance, derivatives and margin lending facilities.

Depending on your circumstances, you may be exempt from the requirement to hold an AFS licence or you may provide financial services under a limited AFS licence. You may also choose to provide financial services as an authorised representative of an AFS licensee.

Ensuring your financial advisor or brokers operates under the umbrella of an Australian Financial Services License will ensure that your consumer rights are intact.