ASIC’s licensing framework requires an AFSL when a business provides financial services involving financial products, and an ACL when it engages in regulated consumer credit activities. The correct licence depends on the actual services, products and clients involved. A business conducting both types of activity may require both licences or appropriate authorisations.
Expanded Answer
An AFSL applies when a business carries on a financial services business, including providing financial product advice, dealing in financial products, making a market, operating certain schemes or providing custodial services.
An ACL applies when a business engages in credit activities covered by the National Credit Act, including providing regulated consumer credit, assisting consumers in obtaining credit, or acting as an intermediary.
The assessment must examine each activity separately. Financial advice about investments, superannuation, insurance or managed investments generally falls within the AFSL regime. Mortgage broking, consumer lending, consumer leasing and certain debt management services generally fall within the ACL regime. Business-purpose credit and activities outside the National Credit Code may not require an ACL, although other laws can still apply.
Applies when: the business conducts a regulated activity in Australia without relying on a valid exemption or representative appointment.
Both licences are required when: the business independently provides regulated financial services and regulated credit activities. ASIC recognises that businesses may operate under a licensee’s authorisation instead of holding their own licence where the legislation permits.
Why it matters
Operating without the correct licence or authorisation can expose the business and its officers to civil or criminal penalties, remediation costs and restrictions on trading. ASIC expects businesses to classify their activities before commencing operations and reassess licensing when services, products or client groups change.
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Practical guidance
- Map every service against the statutory definitions of financial service and credit activity.
- Confirm whether each product, client and transaction falls within the Corporations Act or National Credit Act regime.
- Document any exemption or representative arrangement relied on before commencing the regulated activity.
Further reading
ACL vs AFSL: Which licence do you need?
AFSL requirements: A practical guide for prospective licensees