Treasury has released for consultation ASIC Enforcement Review’s Position and Consultation Paper 3 Strengthening ASIC’s Licensing Powers.
The Australian Financial Services Licence and the Australian Credit Licence are critical licences for financial services and credit providers.
The terms of reference for the ASIC Enforcement Review included consideration of “The adequacy of ASIC’s powers in respect of licensing of financial services and credit providers, including the threshold for granting or refusing to grant a licence …”
The Review recommends that ASIC’s powers to refuse or cancel a financial services licence be more closely brought into line with its powers in credit licensing, including mandating ASIC to assess whether the applicants and controllers of a licence are fit and proper to carry out their duties.
The report cites examples when control of a licensee has been transferred to unrelated third parties and the third party either did not have the resources to provide the services or the proposed responsible manager was not competent.
In the paper “Control” of a licensee refers to anyone with an ability to exert influence over a licensee’s operations or services, such as a majority shareholder, as opposed to the individual or company who was applying for the licence.
The taskforce recommended ASIC be given the power to assess the suitability of licence controllers when deciding whether or not to grant a financial services licence, as well as the power to penalise licensees for failing to notify the regulator of a change of control within 10 days. Currently, while licensees were required to notify ASIC of a change of licence control, there is no statutory obligation to do so, meaning the regulator has no power to penalise those who failed to do so.
The Taskforce has developed preliminary positions on a set of reforms aimed at enhancing the current licensing regimes and achieving greater uniformity between the two regimes. These positions are:
Position 1: ASIC should be able to refuse a licence application (or, for existing licensees, take licensing action) if it is not satisfied controllers are fit and proper.
Position 2: Introduce a statutory obligation to notify change of control within 10 business days of control passing and impose penalties for failure to notify.
Position 3: Align the assessment requirements for AFS licence applications with the enhanced credit licence requirements.
Position 4: ASIC to be empowered to cancel or suspend a licence if the licensee fails to commence business within six months.
Position 5: Align consequences for making false or misleading statements in documents provided to ASIC in the AFS and credit contexts.
Position 6: Making a materially false or misleading statement in a licence application should be a specific basis for refusing to grant the licence.
Position 7: Introduce an express obligation requiring applicants to confirm that there have been no material changes to information given in the application before the licence is granted.
