ASIC finds ‘areas of concern’ with limited AFSL compliance

ASIC has identified areas of concern around compliance with the limited Australian Financial Services Licence (AFSL) regime, after visiting twenty such licence holders.

ASIC has visited twenty holders of limited AFSLs during 2016 and 2017 to assess how they are operating under the new licence and to discuss and promote compliance.

The limited AFSL was introduced as part of the removal of the SMSF accountants’ exemption from 1 July 2016. ASIC says there were 787 limited AFSLs, as of 30 June 2017.

“Each licensee was asked about their business model and provided valuable information about how the new limited AFS licensing regime was operating in practice,” said ASIC.

“Although most of the licensees were still establishing their businesses under the new regime, many indicated the provision of financial advice was not a large part of their business. Only half the licensees had provided advice at the time of our visit.”

Resulting from the visits ASIC identified several “areas of concern”, including uncertainty around ongoing compliance obligations.

“The licensees were uncertain about the resources required to monitor compliance and what steps were required to comply with their general licensee obligation,” said ASIC.

“Where licensees had not yet provided advice about SMSFs they were uncertain about what documents need to be provided to clients, the content of those documents and when they had to be provided to clients – this include the requirements around giving a statement of advice, a key document.”

The limited AFSL holders were also, apparently, confused about what information needed to be uploaded to the Financial Adviser Register (FAR), with nearly half of licensees not having updated the adviser information.

“The licensees ASIC visited indicated they were actively seeking training and assistance on a number of aspects of the AFS licence regime. In light of the findings from this project, ASIC will provide additional education resources for limited AFS licensees, particularly around their ongoing compliance obligations and client engagement. ASIC will shortly provide further guidance on its website on areas of uncertainty highlighted by the visit program.”

ASIC said it will also contact limited AFSL holders who have no advisers on the FAR to remind them of their obligations.

“Limited AFS licensees who have not recorded any advisers on FAR are likely to be in breach of the law.”

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