Making a successful application for an AFS licence for emissions units

An application for an AFS licence consists of the application form itself and the accompanying ‘proofs’ (i.e. a business description; people proofs for each responsible manager (national criminal history check, bankruptcy check, qualifications and references); table of Organisational Competence and financial statements and financial resources). Depending on the authorisations you’re seeking, you may need to answer additional questions in the application and provide further supporting proofs.

You need to submit a licence application that provides us with enough detail about your business and your people for ASIC to be confident that you will meet the AFS licensee obligations. In particular, this means providing us with clear and relevant information in your proofs.

The best way to apply for an AFS licence is online using our eLicensing system, which individually tailors the application to your business. Read more about eLicensing.

Below are more detail on the type and depth of information you should provide in some of the core proofs you need to include with your application.

Guidance on the A5 Business Description proof

The A5 Business Description involves a detailed explanation of how you intend to operate your financial services business in the carbon markets.

‘Detailed’ means the provision of specific information that is sufficient for us to clearly understand the nature and extent of the financial services and products you intend to provide under the AFS licence or variation you seek. If you are able to provide us with a clear submission, we can more easily assess your application, and either approve it quickly, or request additional information if necessary.

Common issues identified in applications include:

  • failing to clearly describe the nature of the proposed financial services and products
  • failing to substantiate the need for particular financial services and product authorisations, and
  • for companies within a group, failing to be clear about which entity is providing which services within the group.

Clearly describing the business and seeking appropriate authorisations

Some applicants don't clearly describe what types of financial services and products they propose to provide in their business. For example, stating that the business will ‘provide credits to clients’ doesn't explain if this is a broking activity or a principal dealing activity, or specify the types of emissions units or related derivatives that will be provided.

We need a clear description of the business activity to ensure that the financial services authorisations you are seeking are appropriate for your proposed business.

Similarly, some applicants seek authorisations for services that don't appear to form a part of the business activities they propose to provide. For example:

  • seeking ‘make a market’ authorisations for a business that won’t include dealing as a principal, or
  • seeking authorisations relating to foreign exchange contracts, when there is no description of business activities involving foreign exchange services.

You should ensure that each authorisation you seek aligns to aspects of the business you propose to provide.

Group corporate structures

Some applicants operating within group corporate structures do not give us clear information about which aspects of the financial services business each entity in the group will be responsible for. If you operate within a group company structure, and multiple entities within your group will be responsible for different aspects of the business, your application should break this down clearly. You need to demonstrate how responsibility for each aspect will be allocated.

Guidance on the B1 Organisational Competence proof

The B1 Organisational Competence proof is a document that substantiates the relevant knowledge, experience and skills of your nominated responsible managers. That is, the people who will be directly responsible for significant day-to-day decisions about the ongoing provision of your financial services.

We assess whether your nominated responsible managers have appropriate product knowledge, market experience, service experience (e.g. advising retail clients where relevant) and regulatory competence (i.e. to be responsible for ensuring that the licensee complies with their financial services law obligations and with the conditions imposed upon any AFS licence issued by ASIC).

Common issues identified in applications include:

  • insufficient explanation of product knowledge and/or experience in the products, and how this knowledge and/or experience has been acquired, and
  • insufficient detail to substantiate market and/or financial services experience.

Options for demonstrating responsible managers’ competence

In Regulatory Guide 105 Licensing: Organisational competence (RG 105), we provide five options for responsible managers to demonstrate they have appropriate knowledge and skills, generally involving various combinations of experience and qualifications or training (Options 1–4), or a written submission (Option 5) demonstrating that your nominated responsible managers have the appropriate experience and skills. For many applicants, Option 5 may be the most appropriate in relation to regulated emissions units, rather than Options 1–4.

Option 5 is a flexible option that does not set minimum qualifications, training or periods of relevant experience. It allows us to take into account a range of different types of training, qualifications and experience your responsible managers may have acquired, and assess these in light of your application as a whole. While we will consider any relevant experience over the past 10 years, this does not necessarily mean that responsible managers need 10 years relevant experience before we will approve them. In the context of the carbon markets, we are looking for experience that sufficiently covers some of the major evolution in the markets over the last few years, either overseas or in similar markets in Australia.

If you choose to apply under Options 3 or 4 (see RG 105), you must explain how the educational or training courses undertaken by your responsible managers has provided them with the product knowledge we require.

Providing sufficient detail on knowledge and experience

An issue we encounter with applications is that some applicants’ descriptions of their nominated responsible managers’ knowledge and experience is too generic, high-level and non-specific. You can help us to understand your responsible manager's experience by providing relevant details. For example, when describing your nominated responsible manager’s work history, tell us, where relevant:

  • when they performed each role and on behalf of which organisations
  • what role they performed in each organisation
  • what specific products they traded and in what volumes, and
  • transactions conducted, or advice provided, in regulated jurisdictions or market environments

Similarly, applicants seeking authorisations to provide services to retail clients need to provide relevant details about their retail client experience. This may be in financial products that are not analogous to emissions units, as long as the applicant can also demonstrate that their nominated responsible managers have otherwise acquired experience and knowledge relevant to emissions units.

Guidance on the people proofs for responsible managers

‘People proofs’ are the documents (national criminal history check, bankruptcy check, qualifications and business references) that provide us with information on the good fame and character of your nominated responsible managers.

Some issues that we find in applications with people proofs are:

  • Business references that relate to past conduct that isn’t relevant to the financial services and products proposed to be provided. Business referees should be selected on the basis that they can attest to a nominated responsible manager’s competency in the relevant financial services and products, and their good fame and character in that context, rather than their character more generally.
  • National criminal history checks not provided for responsible managers who have previously lived overseas jurisdictions and have only recently arrived in Australia. Applicants in this position must provide us with a criminal history check, no more than 12 months old, from the countries in which the responsible manager has lived in over the last 10 years.

Questions on your application?

If you need help with your application, you can call the ASIC Infoline on 1300 300 630.

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Last updated: 20/10/2014 12:00