The new “fit and proper” test that ASIC will apply to all Australian financial services licence applicants will be a higher threshold than the old “good fame and character” test.
Recommendations of the 2016 ASIC Enforcement Review Taskforce that the regulator’s powers be strengthened have finally been put into legislation, with the passage of a bill last month that strengthens ASIC’s licensing powers and extends its banning powers.
Under the old law an applicant for an Australian financial services licence had to be “of good fame and character”, while an applicant for an Australia credit licence had to be “fit and proper”. This anomaly created some practical problems.
Under the new law, The Financial Sector Reform (Hayne Royal Commission Response – Stronger Regulators) Act 2020, applicants for both types of licences must be fit and proper.
The fit and proper persons test has been widened to cover all officers, partners and trustees of an applicant. The test must be satisfied on an ongoing basis.
ASIC will greater power to demand information about an applicant, as well as the power to refuse to grant a licence when a material particular in an application is false or misleading.
In a note to clients, Herbert Smith Freehills has spelled out the matters that ASIC will take into account when considering whether an applicant for and AFSL is fit and proper. These include:
• whether the person’s Australian credit licence (no longer just the applicant’s AFSL) or registration has been suspended or cancelled;
• whether the applicant has been the subject of a banning or disqualification order made under Part 2-4 of the National Consumer Credit Protection Act;
• whether the person has ever been disqualified under the Corporations Act or any other law of the Commonwealth or of a state or territory from managing corporations;
• whether the person has ever been banned from engaging in a credit activity within the meaning of the NCCP Act;
• whether the person has ever been linked to a refusal or failure to give effect to a determination by AFCA; and
• whether in the last 10 years, the person has been convicted of an offence (no longer just an offence that involves dishonesty and is punishable by imprisonmet for at least three months).
Herbert Smith Freehills says ASIC will conduct national criminal history checks, bankruptcy checks. It will give applicants a “statement of personal information’ questionnaire.
Under a new “use it or lose it” power, if an AFSL is granted and the AFSL holder does not provide a financial service covered by the licence within six months of the grant of the licence, the licensee must notify ASIC and ASIC may cancel the licence.