Understanding your Licence Conditions
Your licence generally authorises you in relation to the:
- Types of financial services you can offer i.e. advise or deal; or
- Financial product classes you provide advising and/or dealing services for.
Sometimes your licence will also state the particular financial products within the classes you are authorised to offer, the classes being:
- Financial services authorisations
- Advice authorisations
- Dealing authorisations
- Broking licensing condition
- Financial products class authorisations
Most intermediaries are involved in providing two types of financial services covered by AFS licenses:
- Provide financial product advice
- Deal in a financial product
- Make a market for a financial product
- Operate a registered scheme
- Provide custodial or depository scheme
- Engage in prescribed conduct
Most insurance brokers have two service authorisations- one to advise and one to deal in financial products.
These authorisation guide the extent and scope of your compliance activities. For example, you may be authorised to provide:
- Financial Product Advice- the broadest authorization that allows you to provide personal and general financial product advice to both wholesale and retail clients; or
- General Financial Product Advice Only – where you are limited to provide general advice to retail and wholesale clients; or
- General Financial Product Advice to Wholesale Clients Only.
Your licence may allow you to:
- Deal in a financial product - the broadest category of dealing authorization that allows you to deal in your own product and/or arrange for a person to deal in a financial product; or
- Arrange for a person to deal in a financial product – which covers negotiating for a financial product or bringing a financial product into effect, on behalf of another such as your client. As a product arranger you can act for the fund manager or insurer (usually called a product issuer) the seller (broker or securities dealer) or the customer.
Product issuers like insurance companies and managed investment orgainsations have a potentially wider range of dealing activities open to them because of their product manufacturing role i.e. they can issue, vary and dispose of their own products.
It is possible for a product issuer to use authorised representatives and other licensees to distribute these products. Some product issuers can choose to work exclusively through another licensee such as a broker and so not require an AFSL to deal at all.
This licence condition is only available if your business acts on behalf of the insured in relation to certain life or general insurance products. This condition covers the following terms to describe your business:
- General insurance broker
- Life insurance broker
- Insurance broker or insurance broking
This condition does not preclude your business from acting under a binder at sometime for some products provided you make the correct client disclosures. However if you are acting exclusively under a binder then you cannot use the term insurance broker.
Refer to the Corporations ACT s761A for details on ‘acting’ under a binder from an insurer and s916E for ‘acting on behalf of the intended insured’.
The compliance requirements generally apply to the full range of financial products and services an insurance intermediary business provides. You will require an AFSL if the business advises or deals in financial products covered by the legislation:
- Deposit and payment products including basic deposit products, non-basic deposit products & non-cash payment products
- Derivatives- wool, electricity or grain only
- Foreign Exchange Contacts
- General insurance products (including marine but excluding reinsurance)
- Government debentures, bonds or stocks
- Life products including:
- Investment life insurance products that is not a contract of insurance
- Life risk insurance that is a contract of insurance
- Managed Investments (registered or unregistered):
- Own scheme, Horse racing syndicate and time share schemes
- Miscellaneous financial facility:
- Investment products
- Financial risk products
- Superannuation (regulated superannuation fund), approved deposit fund pooled superannuation trust, and
- Retirement savings accounts (RSA)
- WRAP accounts and packaged insurance products where the individual products fall within the above list of FSRA financial products.