ASIC Releases Licensing and Registration Activity Report

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By Mark Bland, Partner

The Australian Securities and Investments Commission (ASIC) last week published its second six-monthly report on its approach to licensing and professional registration applications. ASIC released its first licensing activity report in May 2015.

Report 448: Overview of licensing and professional registration applications: January to June 2015 highlights ASIC’s current areas of focus. It provides insights into areas of the licensing and registration landscape which are on ASIC’s radar and is also an indicator of ASIC’s likely activities in the next quarter.

The report sets out ASIC’s decisions on applications for the period from 1 January to 30 June 2015 relating to:

  • new Australian financial services (AFS) licences and AFS licence variations;
  • new Australian credit licences (credit licences) and credit licence variations;
  • liquidator, official liquidators, company auditor and approved self-managed superannuation fund (SMSF) auditor registration applications; and
  • applications relating to Australian financial markets, clearing and settlement (CS) facilities and derivative trade repositories.

In ASIC’s media release, ASIC Deputy Chairman Peter Kell stated:

“As we did in our first report, today’s report highlights ASIC’s continuing focus on retail OTC derivatives and marketplace lending, and also discusses the additional areas of digital (robo) advice, limited licensing, consumer leases and Centrepay, and ASIC’s recently announced Innovation Hub.”

Some notable aspects of the report are:

  • Retail OTC derivatives (margin FX trading) – ASIC will continue to pay particular attention to the retail OTC derivatives market; both new entrants and existing providers. The report also includes examples of investigations and actions taken against existing providers.
  • Innovation Hub – ASIC is taking steps to welcome innovation by facilitating meetings with senior staff for fintech businesses developing innovative financial products or services.  This is indicative of a more consultative approach to regulating innovative products.  ASIC has offered to provide guidance and assistance to these types of businesses during the pre-licence application phase. ASIC gives further detail of this initiative in its speech at the Fintech Startups Meetup in Sydney on 15 September 2015.
  • Peer-to-peer lending (marketplace lending) – ASIC’s thinking surrounding peer-to-peer lending has matured.  The report confirms that ASIC prefers to regulate peer-to-peer lending through a managed investment scheme structure.  However, an IDPS structure could also be possible.
  • Robo-advice – the report highlights what a robo-advice platform providing scaled advice will need to do to demonstrate that the advice is in the best interests of the client.
    • If advice is scaled, the platform will:
      • need to be clear on what services are being provided and not being provided; and
      • need to have a triage system to identify when scaled advice will not be in the best interests of a consumer, and the platform must not provide advice when this is the case.
    • This is consistent with Regulatory Guide 175 and 244.
  • Limited licensing (accountant’s exemption) – ASIC has stated that accountants who do not meet ASIC’s requirements by 1 March 2016 will run a significant risk that their applications will not be assessed before 30 June 2016 (the date on which the “accountants’ exemption” ceases to apply). We don’t think ASIC has received the amount of applications they expected. This may be a shot across the bow to accountants taking a wait-and-see approach.
  • Updates to the licensing process – ASIC has flagged intentions to streamline the licensing process and consequently will be revising Regulatory Guides 1, 2 and 3.
  • Changes to policy – ASIC has also flagged changes to principles applied during the application assessment process.  In particular, principles surrounding the:
    • description of business activities and authorisations being sought;
    • key person requirement;
    • role of the responsible manager, including the assessment of competence and capacity; and
    • adequacy of outsourced functions.

Regarding changes to policy, we are particularly interested to see whether ASIC will change its approach for assessing organisational competence to require responsible managers to have experience in the actual provision of the financial services, rather than only requiring experience in the supervision and monitoring of financial services (in ASIC Regulatory Guide 105).

The report and ASIC’s media release can be accessed by clicking here.

For further information, please do not hesitate to contact us.

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    RegTracker 18 October 2022