Tougher regulation is likely for AFS licensees and new applicants by ProQuest


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									 MArkET TrEndS

     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.

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