Australian financial services (AFS) licence

Definition

An Australian financial services (AFS) licence is a legal authorisation issued by the Australian Securities and Investments Commission (ASIC) that allows a business or individual to provide financial services to clients. 

What is an Australian financial services licence?

The AFS licence arrangement wants to make sure that financial service providers meet certain standards of professionalism, competence, and ethical conduct.

Getting an AFS licence is mandatory for businesses that wish to offer financial services such as financial advice, dealing in financial products (e.g., shares, derivatives), or operating a registered managed investment scheme. The licensing process involves comprehensive assessment by ASIC, which assesses the applicant’s qualifications, financial resources, organisational structure, and compliance arrangements to make sure they can meet their obligations to clients under the law.

AFS licensees must comply with strict regulatory requirements, including maintaining good financial resources, implementing robust compliance systems, and participating in dispute resolution schemes. They are also required to disclose information to clients about their services, fees, and any potential conflicts of interest.

ASIC monitors AFS licensees to ensure ongoing compliance with these standards and can take legal actions against those who fail to meet their obligations. This regulatory framework aims to protect consumers, promote market integrity, and maintain confidence in Australia’s financial services sector by setting high standards of conduct and accountability.

Example of an Australian financial services licence

A small financial advisory firm in Melbourne gets an AFS licence from ASIC. This licence allows the firm to legally offer personalised financial advice, manage client investments, and execute trades in financial products such as stocks and bonds. 

The firm undergoes a comprehensive assessment to ensure compliance with ASIC’s standards, including financial stability, robust compliance procedures, and transparent client disclosures. With the AFS licence, the firm can now operate within regulatory guidelines, providing trustworthy financial services to its clients while maintaining credibility in the competitive financial services sector.