Under the Corporations Act, an Australian Financial Services Licence (AFSL) is required when a person carries on a financial services business involving interests in a managed investment scheme. The requirement applies when operating, issuing, promoting, advising on or dealing in scheme interests unless a specific legislative exemption applies.
Expanded Answer
Interests in a managed investment scheme are generally financial products under the Corporations Act. As a result, businesses that provide financial services in relation to those interests must hold an AFSL with the appropriate authorisations or act on behalf of an appropriately authorised AFS licensee. ASIC expects businesses to assess the activities they perform rather than relying on job titles or commercial descriptions.
Licensing obligations commonly arise where a business operates a registered managed investment scheme, issues interests to investors, deals in or arranges for interests to be acquired or disposed of, provides financial product advice about scheme interests or promotes a scheme as part of carrying on a financial services business. The required AFSL authorisations depend on the nature of the activities being undertaken and the financial products involved.
Key obligations:
- Hold an AFSL before carrying on a financial services business involving managed investment scheme interests.
- Ensure the licence includes authorisations for each regulated financial service being provided.
- Do not rely on an exemption unless the legislative conditions are satisfied.
Why it matters
Carrying on a financial services business without the required AFSL is a significant compliance risk and may expose a business to ASIC enforcement action, civil penalties and operational disruption. Determining licensing requirements before commencing activities reduces regulatory risk.
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Practical guidance
- Identify every financial service your business performs in relation to managed investment scheme interests.
- Confirm that your AFSL includes the authorisations required for those activities before commencing operations.
- Review any claimed licensing exemption against the relevant legislative conditions and document the assessment.
Further reading
Managed Investment Schemes and AFSL Requirements
What are the requirements for an AFSL? A Practical Guide for Prospective Licensees