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Printed: 11 March 2010 10:35 AM
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Regulations and Licensing

All corporate activity in Australia is governed by the Australian Securities and Investment Commission (ASIC), a department of the Federal Government which is responsible for the Corporations Act. In addition the Australian Consumer and Competition Commission (ACCC) is responsible for the administration and implementation of the Trade Practices Act, which also governs a wide range of industries, corporate practices and behaviour.

Certain industries are subject to specific provisions, and regulated by additional bodies, or specific areas of ASIC. Examples of these include the Banking Industry which is controlled by the Reserve Bank of Australia (RBA) and Insurance Industry which is controlled by Australian Prudential Regulatory Authority (APRA).

Australia's Fund Management industry is regulated by ASIC's Australian Financial Services Licence (AFSL) regulations, the provisions of which are based on Parts 7.6 to 7.8 of the Corporations Act. As such, any provider of a Financial Product or Service in Australia is required to hold an AFS Licence.

In order to obtain an AFSL, the licensee must demonstrate to ASIC that they meet various professional and industry standards, including business and financial resources, relevant experience, and industry knowledge. As a general guide, the following conditions apply:
  • AFSL licences will be granted for specific types of financial products.
  • Licences will be issued to provide services to either retail or wholesale investors
  • Individuals generally do not require a licence, but must be acting as a representative of a licensee.
  • Overseas parties may be exempt from requiring a licence, provided they provide a service only to wholesale clients, and are regulated by an overseas regulatory authority.
The Corporations Act and the AFSL regulations are detailed and complex. However, as a basic requirement licensees are required to act "efficiently, honestly and fairly" in all their business dealings. In addition, Section 52 of the Trade Practices Act requires that corporations (and directors and officers of those corporations) do not engage in "deceptive and misleading conduct".

In practical terms, any Fund Manager or Investment Advisor is required to be licensed if they are operating in Australia, even if the actual Fund is domiciled offshore and only has offshore investors.

The terms of each provider's licence are available on ASIC's website, and all investors should check that any provider of a financial product or service is suitably licensed and displays their AFS Licence number (or ASFL).