Choosing your licence authorisations is one of the most important steps in applying for an AFS licence. Your authorisations affect:
- The financial services you can provide under your AFS licence and the financial products those services can relate to;
- The obligations you will have as an AFS licensee; and
- Whether you can use certain restricted terms such as “stockbroker”, “insurance broker”, etc.
If you don’t choose the right ones you may not be authorised to provide the financial services and products you want to provide. You may find it useful to:
- Identify which financial services you will provide (e.g. provide financial product advice, deal in a financial product); then
- Identify each financial product those financial services will cover (e.g. superannuation, general insurance, derivatives, etc).
The following is ASIC’s advice to potential licensees covering:
- Financial services
- Types of financial product advice
- Choosing your financial products
- Financial products
- Authorisation to use certain terms
You will be asked to select one or more financial services from the following list:
- Provide financial product advice (commonly referred to as “advising”);
- Deal in a financial product (commonly referred to as “dealing”);
- Make a market for a financial product;
- Operate a registered scheme;
- Provide a custodial or depository service.
Financial product advice is defined in section 766B of the Corporations Act 2001. Financial product advice may be either:
- Personal advice – this is defined in section 766B(3). Generally, you will be giving personal advice if you have considered, or a reasonable person might expect you to have considered, one or more of the client’s objectives, financial situation and needs; or
- General advice – this is defined in section 766B(4). It covers all financial product advice that is not personal advice.
For more information on financial product advice and the distinction between personal and general advice, see ASIC Regulatory Guide RG175.
You will be asked to select the type of financial product advice that you want to be authorised to provide. Choose one of the following:
- Provide financial product advice – this authorisation will cover both personal and general advice to both wholesale and retail clients; or
- Provide general financial product advice only – this authorisation will cover general advice to both wholesale and retail clients (i.e. it does not cover personal advice); or
- Provide general financial product advice only to wholesale clients – these authorisations will only cover general advice to wholesale clients (i.e. it does not cover personal advice or general advice to retail clients).
The terms “retail clients” and “wholesale clients” are defined in section 761G.
You will then be asked to select the financial products that you want to advise on.
The range of financial products regulated under the financial services regime is relatively broad.
Dealing in a financial product
Dealing in a financial product is defined in section 766C. You will be dealing if you do any of the following, either as principal or as an agent of another person:
- Apply for, acquire, issue, vary or dispose of a financial product; or
- In relation to securities or managed investment interests, underwrite the securities or interests.
Dealing also includes “arranging” for another person to do any of the above activities (this is commonly referred to as “arranging”). For example, if you have the authority to bind your client when applying for a product, you will generally be “dealing” and not “arranging”. However, if you merely display brochures and provide no other services to bring about a transaction, you will generally only be arranging.
Types of dealing services
You will be asked to select either:
- Dealing in a financial product – select this authorisation if you will be dealing, or dealing and arranging; or
- Arranging for a person to deal in a financial product – select this authorisation if you will only be arranging. If you choose arranging you will not be able to deal as principal or as an agent of another person. In the application you can only choose dealing or arranging.
You will be asked to select the particular types of dealing or arranging services that you want to be authorised for. You can choose one or more of the following:
- Issue, apply for, acquire, vary or dispose of a financial product – this authorisation generally applies to product issuers, such as responsible entities, life companies, fund managers and general insurers. However, it can apply to anyone who wants to provide any of these types of dealing or arranging services as principal or as an agent; and/or
- Apply for, acquire, vary or dispose of a financial product on behalf of another – select this authorisation if you intend to provide any of these types of dealing or arranging services on behalf of another person); and/or
- Underwrite an issue of securities or interests in managed investments – this includes interests in both unregistered and registered managed investment schemes.
If you want to be authorised for dealing on behalf of another person and arranging for another person to issue financial products, the application won’t let you select these as separate authorisations because it assumes that your dealing authorisation will include arranging for another person to deal.
In the application the financial product authorisations are grouped under 11 broad categories based on the definitions in sections 761A and 764A of the Corporations Act 2001. Before you select your product authorisations you need to think about each particular product you will be providing and what category it fits under. You should carefully check the definitions.
The following broad categories are designed to cover all types of financial products:
- Deposit and payment products—this includes basic deposit, non-basic deposit and non-cash payment products;
- Foreign exchange contracts;
- General insurance;
- Government debentures, stocks or bonds;
- Life products – this includes any products issued by a registered life insurance company that are backed by one or more of its statutory funds;
- Managed investment schemes – this includes interests in both registered and unregistered schemes;
- Retirement savings accounts;
- Miscellaneous financial facilities.
Under section 923B AFS licensees are restricted from using certain terms to describe their financial services business unless they are expressly authorised to do so under a condition on their AFS licence. These restrictions apply to the following (or similar) terms:
- “Stockbroker” or “share broker”;
- "Futures broker”;
- “Insurance broker” or “insurance broking”;
- “General insurance broker”;
- “Life insurance broker”.
You can only be authorised to use them (or similar terms) if you select the dealing service authorisation and then the appropriate dealing activities and products.
“Insurance broker”, “insurance broking”, “general insurance broker” and “life insurance broker”.
To be eligible to use these terms you must be applying to deal in:
- General and/or life insurance products (for “insurance broker” and “insurance broking”);
- General insurance products (for “general insurance broker”); or
- Life insurance products (for “life insurance broker”).
You must also act on behalf of the intending insured (i.e. the client), as opposed to acting on behalf of the insurance company.