Tougher regulation is
likely for AFS licensees
and new applicants
Existing AFS licensees and new financial services industry
participants can expect a tougher and more onerous regulatory
approach from ASIC in relation to new licence applications
and compliance arrangements.
Although thE PJC INquIry into financial the threshold test significantly, as ASIC can simply
products and services had not yet reported its rely on a pattern of behavior in the past, or act on
findings and recommendations at the time of writing, suspicion. This is an important development for
the ASIC submission to the inquiry provided a clear licensees because, if enacted, it will alter the way
indication of the likely direction of regulatory reforms compliance, the appointment process and
in the licensing area. supervisory arrangements are carried out.
This proposal means that ASIC would be able
licensing proposals to look behind the entity, examine the conduct and
ASIC has proposed that the licensing power be competency of the persons providing the financial
broadened to refuse an application, or remove a services, and assess the application based on wider
licensee, on the grounds that the licensee ‘may not sources of information. Grounds for ASIC to refuse a
comply’ with their obligations, as opposed to the licence application or ban an individual may include
current higher threshold of ‘will not comply’. ‘Will not factors such as the failure to comply with internal
comply’ is extremely difficult to prove as it is almost guidelines, failure to comply with market operating
impossible to demonstrate what a licensee would rules, or conduct that may amount to serious
or would not do in the future. conflicts of interest (see ASIC submission, para. 97).
In order to substantiate this case, it is fairly Other factors that could conceivably be taken into
inevitable that evidence of repeated and ongoing account will be things like:
non-compliance will be required to demonstrate the l failure to meet ongoing training requirements;
licensee’s unwillingness or inability to comply in the
future. ‘May not or is not likely to comply’ will lower l an unresolved complaint from client;
l an imminent legal proceeding against the
Su-KINg hII F Fin is the principal of Innoinvest Consulting.