Tough new licensing powers flagged for ASIC
The Australian Securities and Investments Commission (ASIC) would have the power to refuse applications for Australian financial services licenses (AFSLs) upfront if it believes the applicants are not fitter and proper persons under changes recommended under the ASIC Enforcement Review.
The consultation paper produced as a result of the Enforcement Review makes clear that it wants to see ASIC’s powers increased where licensing is concerned, particularly around the question of whether people are “fit and proper” to hold a licence.
Further, it would fall to the licence applicants to provide the regulator “with sufficient information about its controllers, including relating to their prior conduct, to enable ASIC to properly make this assessment”.
ASIC would also have the power to act on the basis of “fit and proper” after a licence had been granted.
The content of the consultation paper represents a victory for ASIC which has lobbied hard in a range of forums for increased discretion and powers around licensing in circumstances where, under the current regime, the fitness and propriety of controllers of licensees is not required to be assessed.
The taskforce which undertook the Enforcement Review has adopted a preferred position that, in future, ASIC should be able to refuse a licence (or, for existing licensees, take licensing action) if it is not satisfied controllers were fit and proper.
It also wants to impose a statutory obligation on licensees to notify a change of control within 10 business days of control passing, with penalties being imposed where this does not occur.
As well, it is recommending that ASIC be empowered to cancel or suspend a licence if the licensee fails to commence business within six months.
Importantly, the taskforce has not only recommended that ASIC have the power to refuse to grant a licence on the basis of applicants failing the “fit and proper” test but to extend that power to the new controllers where a licence changes hands.
Recommended for you
Financial Services Minister Stephen Jones has shared further details on the second tranche of the Delivering Better Financial Outcomes reforms including modernising best interests duty and reforming Statements of Advice.
The Federal Court has found a company director guilty of operating unregistered managed investment schemes and carrying on a financial services business without holding an AFSL.
The Governance Institute has said ASIC’s governance arrangements are no longer “fit for purpose” in a time when financial markets are quickly innovating and cyber crime becomes a threat.
Compliance professionals working in financial services are facing burnout risk as higher workloads, coupled with the ever-changing regulation, place notable strain on staff.
