Limited financial services
As part of the Future of Financial Advice (FOFA) reforms, the 'accountants' exemption' was repealed on 1 July 2016. This exemption allowed recognised accountants to provide financial product advice about acquiring or disposing of an interest in a self-managed superannuation fund (SMSF) without being covered by an Australian financial services (AFS) licence. This means that all accountants must now be covered by an AFS licence to give advice about acquiring or disposing of an interest in an SMSF – that is, they must either hold an AFS licence or be a representative of an AFS licensee.
To facilitate moving into the AFS licensing regime, accountants can apply for an AFS licence to provide a limited range of financial services relevant to SMSFs. We refer to this form of licence as a 'limited' AFS licence: see regulations 7.8.12A and 7.8.14B of the Corporations Regulations 2001 (Corporations Regulations).
- What is a limited AFS licensee?
- Scope and possible authorisations
- Applying for a limited AFS licence
- Lodging an annual compliance certificate
- Training and qualifications
What is a limited AFS licensee?
We use the term 'limited AFS licensee' to describe a licensee who is authorised to provide only one or more of the following limited financial services:
- Financial product advice about:
- SMSFs
- a client's existing superannuation holdings in certain circumstances.
- 'Class of product advice' about:
- superannuation products
- securities
- simple managed investment schemes
- general insurance products
- life risk insurance products
- basic deposit products.
A limited AFS licensee can also be authorised to arrange to deal in an interest in an SMSF.
An AFS licensee who is authorised to provide financial services in addition to those limited financial services set out above is not a limited AFS licensee.
Limited AFS licensees:
- do not need to lodge an auditor's report annually if they do not handle client money – instead they can lodge an annual compliance certificate
- must meet the relevant requirements of the Corporations Act 2001 (Corporations Act), including the conduct and disclosure obligations in Chapter 7, and their licensing conditions.
For more information about ongoing compliance obligations, see Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104). See also Information Sheet 216 AFS licensing requirements for accountants who provide SMSF services (INFO 216).
Scope and possible authorisations
AFS licences set out the range of financial services you are authorised to provide for specific types of financial products. They also specify the types of clients to whom you can provide these services.
The authorisations on your limited AFS licence may include one or more of the combinations set out in Table 1 . These services may be provided to any type of client.
Table 1: Possible limited financial services authorisations on your AFS licence
| Service | Products |
|---|---|
|
Provide financial product advice |
Interests in an SMSF Superannuation products, in relation to a client’s existing holding, to the extent required for:
|
|
Provide class of product advice |
Superannuation products, securities, general insurance, life risk insurance and basic deposit products (as defined in the Corporations Act) Simple managed investment schemes (as defined in regulation 1.0.02) |
|
Arrange for a person to deal in a financial product, including applying for, acquiring, varying, issuing or disposing of financial products on behalf of another |
Interests in an SMSF |
See also the definition of 'limited financial services' in regulations 7.8.12A(4) and 7.8.14B(3) of the Corporations Regulations.
You can specify in your licence application which of the financial services and products you want to be authorised to provide by your licence. For detailed guidance about choosing your authorisations, see Section A of Regulatory Guide 2 AFS Licensing Kit: Part 2—Preparing your AFS licence or variation application (RG 2).
What does 'providing financial product advice' mean?
Financial product advice means a recommendation or statement of opinion that is provided with the intention of influencing a person’s decision about a financial product, or could reasonably be regarded as intending to have such an influence: section 766B of the Corporations Act. There are two types of financial product advice:
- personal advice
- general advice.
Personal advice is where the provider of the advice has considered one or more of the client’s objectives, financial situation and needs (or a reasonable person might expect the provider to have considered one or more of those matters): section 766B(3). All other financial product advice is general advice: section 766B(4).
For more information on financial product advice and the distinction between personal and general advice, see Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36), Regulatory Guide 175 Licensing: Financial product advisers—Conduct and disclosure (RG 175) and Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244).
What is 'class of product' advice?
Class of product advice is financial product advice about a class of products, but does not include a recommendation about a specific product in the class: see the definition in regulations 7.8.12A(4) and 7.8.14B(3). Applicants for a limited AFS licence can choose to be authorised to give class of product advice about the following financial products:
- superannuation
- securities
- general insurance
- life risk insurance
- basic deposit products
- simple managed investment schemes.
An example given in Corporations Regulations of what constitutes class of product advice is an AFS licensee recommending their client deposit their money in a term deposit, but not recommending that they get a particular term deposit.
What is 'arranging to deal'?
Under a limited AFS licence, you can apply to be authorised to arrange to deal on behalf of another person in an interest in an SMSF.
Arranging to deal is defined under section 766C(2) of the Corporations Act, and includes doing the following on behalf of another person:
- applying for or acquiring a financial product
- issuing a financial product
- varying a financial product
- disposing of a financial product.
If these activities amount to providing financial product advice to a client, the activity is excluded from the definition of 'arranging to deal': section 766C(2). For further guidance about arranging to deal, see RG 36.
Applying for a limited AFS licence
Any person can apply for a limited AFS licence (i.e. not only accountants).
Applying as a trustee
Sole trustees
If you are the sole trustee of a trust with an Australian Business Number (ABN), there are some particular guidelines you need to follow when making your application. We cannot accept an application for an AFS licence for an entity that is sole trustee of a trust under the trustee’s ABN (e.g. an ABN corresponding to 'The Trustee for XXX Trust').
If you are a sole trustee, when prompted in the application form to select whether you are applying for an AFS licence as an individual, partnership, company, trustee of a trust or 'other' entity, rather than selecting 'trustee of a trust' you should select they type of entity corresponding to the trustee itself—for example, if the trustee is:
- a company, you should enter the Australian Company Number (ACN) of the company trustee on the application form at question A0.2 and select A1.1.3
- an individual, you should enter the ABN of the individual on the application form at question A0.2 and select A1.1.1. If the individual trustee does not hold an ABN, you should obtain an ABN in the individual trustee’s name and apply using the new ABN.
Partnerships of trustees and multiple trustees
A partnership of trustees can also apply for a limited AFS licence. In this case, the entity type selected for the application is 'partnership'. You should enter ABN of the partnership (e.g. the ABN corresponding to 'The Trustee for XXX Trust & The Trustee for XXX Trust') on the application form at question A0.2 and select A1.1.2.
A multiple trustee is a notional person that consists of two or more trustees of a single trust. A multiple trustee can apply for a limited AFS licence. In this case, the entity type selected for the application is 'trustees of a trust'. You should enter the ABN of the multiple trustee (e.g. the ABN corresponding to 'The Trustee for XXX Trust') on the application form at question A0.2 and select A1.1.4.
To enable ASIC to determine that there are multiple trustees, please include a covering letter with the application, explaining the multiple trustee structure. Please also include a description of the multiple trustee structure in the A5 Business Description proof.
How do I apply?
Before you apply for a limited AFS licence, make sure you have read our detailed guidance and have prepared the documents you will need to lodge with your application.
See Applying for and managing an AFS licence for full details about the application process.
Lodging an annual compliance certificate
Limited AFS licensees who do not handle any client money in connection with the provision of financial advice or services will be able to lodge an annual compliance certificate rather than undertake an annual audit: see regulations 7.8.12A and 7.8.13A. Details about lodging an annual compliance certificate will be provided to any eligible limited AFS licensee.
If you are a limited AFS licensee for part of a year, and you have a licence with other authorisations in addition to the limited AFS licence authorisations for the remainder of the year (i.e. you do not meet the definition of limited AFS licensee in regulation 7.8.12A for part of a year), you will need to lodge an audit report for that part of the year where you have authorisations in addition to the limited AFS licence authorisations: see regulation 7.8.12A.
Limited AFS licensees who lodge annual compliance certificates will still need to lodge financial statements (as required by sections 989B(1) and 989B(2) of the Corporations Act) and comply with the financial resource requirements in Regulatory Guide 166 Licensing: Financial requirements (RG 166). This means that once you are licensed, you will need to lodge Form FS70 Australian financial services licensee profit and loss statement and balance sheet within the required timeframe.
Training and qualifications
Limited AFS licensees must ensure:
- their responsible manager has the training or qualifications needed to satisfy the organisational competence requirements in Table 1 of RG 105
- those who give financial product advice to retail clients meet the specific training requirements set out in Regulatory Guide 146 Licensing: Training of financial product providers (RG 146).
Responsible managers who also provide financial product advice to retail clients must meet both sets of training requirements.