What Is an AFSL?

What counts as a financial service

• Providing financial product advice — general or personal, and the line between them is narrower than most businesses assume.
• Dealing in a financial product — issuing, applying for, acquiring, varying or disposing of a product, including arranging for someone else to do so.
• Making a market in a financial product.
• Operating a registered managed investment scheme, or providing a custodial or depository service.
• Providing a crowd-funding service or a claims handling and settling service in insurance.

The definition of "financial product" is broad: securities, interests in managed investment schemes, derivatives, general and life insurance, superannuation, deposit products, non-cash payment facilities, and foreign exchange contracts. Many businesses that do not think of themselves as financial — a platform that lets customers store and transfer value, a broker arranging cover, a marketplace pooling investor money — sit squarely inside it.

Three routes to compliance

1. Your own AFSL. Full control of scope and distribution. Requires a substantive application to ASIC with proofs covering organisational competence (your responsible managers and their qualifying experience), financial resources, compliance and risk management, conflicts management, dispute resolution and outsourcing.
2. Authorised representative. You operate under an existing licensee's AFSL for specified services. Faster and cheaper to launch, but the licensee sets your authorised scope, monitors you, takes responsibility for your conduct, and can end the arrangement.
3. An exemption. Exemptions exist — for example certain wholesale-only arrangements, foreign providers under ASIC relief, and referrals that stop short of advice. Exemptions are narrow and fact-specific, and "we only deal with wholesale clients" is often wrong on the evidence.

What ASIC actually assesses

Licensing is document-driven. The most common cause of delay is not the business model but weak proofs: responsible managers whose experience does not map to the authorisations sought, a compliance manual that has been bought rather than built for the business, financial projections that do not demonstrate the applicable financial requirements, and no credible plan for supervising representatives. Preparing these properly before lodging is the single biggest time saver.

Ongoing obligations once licensed

Section 912A of the Corporations Act sets the general obligations: do all things necessary to ensure financial services are provided efficiently, honestly and fairly; maintain the competence to provide them; adequately train and supervise representatives; manage conflicts of interest; have adequate technological, human and financial resources; maintain internal and external dispute resolution, including AFCA membership; and have adequate risk management systems. On top of that sit the design and distribution obligations, breach reporting, annual audited financial statements lodged with ASIC, and product-specific disclosure requirements.

Licences are also conditional. Authorisations are drafted tightly, and operating outside them is a breach even if the activity would have been approved had you asked.