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Key Updates to AFS and RSE Licensing Requirements

Getting the appropriate licence is your ticket to providing financial services to your target clients. However, once you have that ticket, the entry requirements are still subject to change.

How do you ensure you continue to meet those requirements? By remaining informed of licensing updates released by the regulators and acting sooner rather than later.

To help you stay informed, this blog summarises the key licensing updates from ASIC and APRA in relation to:

1. Making claims handling a financial service

2. Licensing for foreign financial services providers

3. Approval for RSE licensee controlling stakes


1A. Making claims handling a financial service

The Financial Services Royal Commission presented case studies regarding insurer misconduct in the handling and settling of insurance claims. This prompted the recommendation that insurance claims handling and settling should no longer be excluded from the definition of ‘financial service’ in the Corporations Act 2001.

The Financial Sector Reform (Hayne Royal Commission Response) Bill 2020 was introduced into Parliament on 12 November 2020. It requires those providing claims handling and settling services to be covered by an Australian Financial Services (AFS) licence with the relevant authorisation.

A draft information sheet released by ASIC in late November 2020 covers the activities considered as ‘claims handling and settling’, how the AFS licensing regime applies, and who is exempt. This was subject to further refinement in an exposure draft and explanatory statement released by Treasury in mid December 2020.

Activities considered as ‘claims handling and settling’

The following activities are ‘claims handling and settling’ in relation to insurance products:

· Making a recommendation or stating an opinion:

a) In response to an inquiry about a claim or potential claim

b) That could influence a decision about making or continuing with a claim

· Representing someone pursuing a claim

· Assisting another person to make a claim

· Assessing whether an insurer is liable under an insurance product

· Deciding to accept or reject a claim (full or partial)

· Quantifying an insurer’s liability under an insurance product

· Offering to settle a claim (full or partial)

· Satisfying a liability of an insurer under a claim

How the AFS licensing regime applies

To provide a financial service in Australia generally requires:

· An AFS licence with authorisation to provide that service

· Authorisation to provide the service given by an AFS licensee with the relevant authorisation (i.e. an authorised representative)

As ‘claims handling and settling’ is no longer excluded from the definition of a ‘financial service’, an AFS licence authorising the provision of such services will be required.

Who must hold an AFS licence?

The ASIC release in late November 2020 noted that the following prescribed categories will need to hold an AFS licence with claims handling authorisation:

· Insurers

· Insurance claim managers

· Insurance fulfilment providers (tradespersons who can reject claims on behalf of an insurer)

· Claimant intermediaries (anyone carrying on a business representing people to pursue insurance claims for compensation)

· Insurance brokers and financial advisers who handle claims on behalf of an insurer (subsequently excluded, as per commentary below)

Financial Advisers

As a result of the ASIC release, many advisers were concerned that the new legislation will apply to them. However, only those working for insurers are likely to be impacted, based on further anticipated refinements to the legislation.

According to Professional Planner and Financial Planning Association CEO Dante De Gori, “ASIC’s release led to dozens of queries from advisers asking if they needed to apply for what ASIC call a “variation” to their existing AFS licence. It’s almost certain, however, that regulation following the initial legislation will include an insert clarifying that licensed financial advisers who don’t work for an insurer will not be impacted, De Gori explains. We have been told by Treasury and other stakeholders that advisers not employed by insurers will be exempt”.

In mid December 2020, Treasury released for consultation an exposure draft regulation paper outlining the prescribed circumstances in which a person is excluded from new laws requiring a licence to perform claims handling services. Financial advisers are now excluded from the regime.

Insurance Brokers

Based on the mid December release from Treasury, an insurance broker as defined by the Insurance Contracts Act 1984, who arranges a contract as an agent for the intended insured and who represents the client in pursuing a claim under the contract will not need to apply for an Australian Financial Services (AFS) licence.

Treasury says brokers who meet the criteria are exempted because claims handling is typically not their core business and they often do it for no monetary benefits. “The purpose of these regulations is to exclude certain parties not intended to be captured but that meet the claimant intermediary definition when handling insurance claims,” Treasury said in an exposure draft explanatory material statement. “This will avoid the unnecessary regulatory burden of requiring these parties to obtain an Australian financial services licence.”

Who else is exempt?

Further to the above in respect of financial advisers and insurance brokers, the following general and specific exemptions guide who is not required to hold an AFS licence with claims handling authorisation.

Registrable superannuation entity licensees (i.e. RSE licensees or superannuation trustees) fall under the general exemption. However, RSE licensees need to hold an AFS licence with authorisation to provide a ‘superannuation trustee service’. This includes all activities relating to the provision of superannuation products, including claims handling.

The mid December exposure draft from Treasury further specified that the following parties are excluded from the regime, in addition to financial advisers and insurance brokers:

· Mortgage brokers and mortgage intermediaries

· Qualified accountants

· Veterinarians

· Travel agents

· Property managers

· Estate managers

· Public trustees

Timeline for applications

Even if your business already holds an AFS licence, you will need to apply for a variation to your licence to include claims handling and settling authorisation.

Subject to the passing of the Bill, ASIC will receive applications for and variations to AFS licences from 1 January 2021.

A transition period from 1 July 2021 to December 2021 will allow claims handling and settling services to be provided if a complete application was lodged by 30 June 2021 and is approved or pending approval.

From 1 January 2021, claims handling and settling services can only be provided if the application has been approved by ASIC.

1B. Licensing for foreign financial services providers

A new regulatory framework for foreign financial services providers (FFSPs) commenced on 1 April 2020.

Current arrangements

To provide financial services in Australia generally requires holding an AFS licence, unless relief is granted by ASIC or an exemption applies. FFSPs are currently exempt from this requirement.

New arrangements

The new regulatory framework replaces AFS licensing exemptions for FFSPs. The following new arrangements apply to FFSPs providing financial services to wholesale clients or professional investors in Australia:

· Foreign AFS licence – applicable to a FFSP authorised by an overseas regulatory authority that regulates the FFSP under a sufficiently equivalent regime (as assessed by ASIC)

· Funds management relief – an exemption from the requirement to hold an AFS licence extended to a FFSP only inducing certain types of Australian professional investors to use the funds management financial services it provides (conditions apply)

· Standard AFS licence – applicable to a FFSP not eligible for a foreign AFS licence or funds management relief where no other licensing exemption applies

Eligibility for a foreign AFS licence

To be eligible to apply for a foreign AFS licence, a FFSP must be authorised under an overseas regulatory regime that ASIC has assessed as sufficiently equivalent to the Australian regulatory regime. Overseas regulatory regimes are specified in Schedule 1 of ASIC Corporations (Foreign Financial Services Providers— Foreign AFS Licensees) Instrument 2020/198.

ASIC’s extension of relief

Where a FFSP is not covered by any of the overseas regulatory regimes specified in the Instrument, ASIC will assess applications to extend the above relief to cover additional overseas regulatory regimes.

Obligations and exemptions for foreign AFS licensees

A foreign AFS licensee is subject to a streamlined licensing assessment and is exempt from certain obligations under Chapter 7 of the Corporations Act 2001 that apply to other AFS licensees, such as financial and organisational competence requirements. This is because it is subject to sufficiently equivalent overseas regulatory requirements that would achieve similar regulatory outcomes to the exempted provisions.

However, a foreign AFS licensee must comply with:

a) All other applicable provisions under the Corporations Act 2001; and

b) The applicable conditions on its foreign AFS licence and the Corporations Regulations other than those applying under reg 7.6.04(1)(a) and (d).

Timeline for compliance

FFSPs currently relying on pre-existing relief have a two-year transition period until 31 March 2022 to make arrangements to continue their operations in Australia, which may include applying for a foreign AFS licence.


2A. APRA’s updates for RSE licensees

Licence applications

On 8 April 2020, APRA issued a letter to licence applicants, advising of a temporary suspension to issuing new APRA licences due to the COVID-19 pandemic. APRA has now lifted the suspension and since issued another letter specifically to RSE licensees regarding controlling stake requirements.

A reminder from APRA

In the letter, APRA notes that since the introduction of the controlling stake requirements in July 2019, RSE licensees and relevant persons acquiring controlling stakes do not always consider how the requirements apply to their circumstances.

APRA reminds RSE licensees that owning a controlling stake in a RSE licensee prior to obtaining APRA’s approval is a strict liability offence under 29JCB of the Superannuation Industry (Supervision) Act 1993.

Approval requirements

An application for approval from APRA is required for a new RSE licence and for the following changes:

· Directors of a RSE licensee, where this involves a change in share ownership

· Restructure of a corporate group

· Acquisition of shares in a RSE licensee or its holding company

· A successor fund transfer resulting in the issue or transfer of shares to a director, employer organisation or employee organisation

Actions to take

APRA urges RSE licensees to prioritise the following activities:

1. Identify any changes to the ownership of shares in an RSE licensee since 5 July 2019 for which APRA approval has not been obtained

2. Obtain appropriate professional advice on how the Financial Sector (Shareholdings) Act 1998 ownership requirements apply to the RSE licensee’s current ownership structure

3. Review the RSE licensee’s constitution, shareholder deed and/or risk management framework to ensure controlling stake requirements and the requirement to seek APRA approval are included

4. Lodge a controlling stake application with APRA (where required)


Applying for a licence or approval from a regulator can be a time-consuming and tedious task. Here’s the good news – you don’t have to do it alone. We’re here to support you through the process. ASIC and APRA licensing, registrations and approval applications are part of our core services at Hall Advisory.

Here’s how we can help:

· Preliminary assessment to determine whether a AFS or RSE licence is required based on the nature of services provided

· Identification of the key information required for an application or variation

· Guidance through the licence application process

· Liaison with ASIC or APRA during the application process

To lodge a timely application and remain a step ahead, contact us for a confidential, no-obligation consultation.


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