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Why is it Important to Ensure AFSL Compliance?

All organisations that provide and deal with financial products and services in Australia are required to hold an Australian Financial Services Licence (AFSL). The AFSL is granted to these organisations by the Australian Securities & Investments Commission (ASIC) after a thorough assessment of several factors. However, the process of application and ensuring compliance is not easy and can get very complicated. It is thus beneficial for the afsl responsible manager in the organisation to avail the services of a competent and effective compliance service team.

Who needs an AFSL, and what is the process?

According to the guidelines by ASIC, a business requires an AFSL if it provides the following:

  • Advice or recommendations to clients regarding which financial products to purchase.
  • Dealing with a financial product on behalf of the client.        
  • Operate and manage investment schemes.
  • Provide or deliver other financial services.

Businesses dealing with financial products and services that do not hold an AFSL can be subjected to hefty fines by ASIC. It is therefore imperative to apply for a licence before undertaking any financial dealings with clients. In order to apply for an AFSL, a business organisation must fulfil certain basic criteria and possess the following attributes, such as having the competency and capability to undertake the financial services mentioned in the application, ensuring the availability of adequate financial resources, and so on.

What is an AFSL responsible manager?

An afsl responsible manager (RM) can be an individual working within the financial services organisation or an externally hired contractor responsible for ensuring proper compliance and competence of the business with regards to providing the required financial services. An RM is required to have the following qualities and responsibilities:

  • Having the required legal and regulatory knowledge to ensure compliance of the business organisation with the rules and regulations of ASIC.
  • Direct control and responsibility concerning daily decisions regarding the business’s financial products and services.  
  • Other criteria specified by ASIC under its Regulatory Guide (RG) 105.

Why it is preferable to have a compliance team

Although applying for an AFSL can be done online, it is generally an extremely daunting task. It requires a lot of time, money, and effort and a lot of legal and regulatory knowledge and expertise. Moreover, it is imperative that the RM ensures continued obedience to the stringent regulatory requirements even after getting the licence. Hence, it is generally advised to undertake the process with the help of specialised consultants, who will guide the organisation with respect to the required compliance needs and obligations.

Many important factors come into play under this process, all of which require legal expertise. A compliance consultant team works with an organisation to ensure that all regulatory requirements are being fulfilled. These include:

  • Drafting customised AFSL policies designed for the specific needs and requirements of one’s organisation.
  • Assistance with the nomination, appointment, training and termination of RMs.                        
  • Assistance and aid for ensuring ongoing regulatory compliance.    
  • Managing different conflicts of interest.         
  • External reviews of the existing AFSL compliance framework of the business.

Companies and businesses that are found to violate the regulations set up by ASIC may face suspension or cancellation of the licence and incur heavy fines and other punitive measures. It is thus imperative for all financial service providers to engage with compliance consultant teams to remain diligent in following the guidelines set up by ASIC.