The change is bigger than it looks
Previously AFS licensees had a lower threshold test that a person be of ‘good fame and character.’ On the face of it, the change may seem trivial, but the effects are wide reaching.
ASIC now has the ability to:
- Assess the suitability of entities applying for a licence or that control an AFS or credit licence by requiring applicants to provide information on all officers of the licence applicant and any controllers of the licence applicant (or its officers);
- Refuse to grant a licence if any of the officers of the licence applicant, or its controllers, if any, or the controller’s officers, are found not to be fit and proper;
- Consider previous conduct in other businesses to determine whether an officer of a licence applicant will satisfy the fit and proper test; and
- Vary or revoke an AFS or credit licence if the licensee, its officers, or controllers (or its officers) no longer satisfy the ‘fit and proper person’ test.
Who must be a fit and proper person?
All ‘officers’ of both a licensee and the controller of the licensee, and the controller itself (if not a company), must meet the fit and proper person test.
An ‘officer’ typically includes:
- directors;
- company secretaries;
- responsible managers;
- chief executive officers;
- chief financial officers;
- senior managers; or
- any other person who influences the whole, or a substantial part of the decisions made by the business. This will of course vary from business to business.
This means that an applicant must demonstrate to ASIC that each of these people are ‘fit and proper’ when applying for an AFS or credit licence.
What will ASIC consider when assessing a ‘fit and proper’ person?
To grant an AFS or credit licence, ASIC must have no reason to believe that the applicant is not a ‘fit and proper person’ to engage in the activities authorised by the licence.
Practically, ASIC now requires each ‘officer’ to provide the following:
- Criminal history check;
- Bankruptcy check; and
- A statement of personal information.
This allows ASIC to consider:
- Any previous AFS or credit, or other professional licence, suspensions or cancellations of the person or any company for which they were a director;
- Whether the person has had any banning orders;
- Whether the person has ever been insolvent or has been the director of a company that has been placed into administration;
- Whether the person has had any criminal offences; and
- Any additional information that ASIC requests.
Licence applicants must also now provide ASIC with an express declaration that there has been no material changes to the person and the information that was lodged to ASIC before a licence is granted.
How will this impact existing licensees?
Even if you already have an AFS or credit licence, you will need to meet the ‘fit and proper person’ test moving forward. If you apply for a variation to your licence ASIC will assess whether all existing and new ‘officers’ are ‘fit and proper’. Consider putting measures in place to ensure you regularly check that ‘officers’ remain ‘fit and proper’. This could include:
- Periodically conducting police and bankruptcy checks; or
- Asking officers to complete a declaration about any conduct of theirs that may affect their standing as a ‘fit and proper’ person.
By Sónia Cruz and Nicholas Pavouris