Australian Financial Services Licensees (AFS Licensees) who are not regulated by the Australian Prudential Regulatory Authority (APRA) must have adequate financial resources and appropriate risk management systems that address the Licensees risk to financial resources.
There are certain base level requirements that apply to most AFS Licensees, with additional requirements for AFS Licensees who conduct certain types of financial services. ASIC sets out the financial requirements for all AFS Licensees in RG 166 Licensing: Financial requirements.
Base Level Requirements
The base level requirements applicable to all AFS Licensees not regulated by APR) are that the AFS Licensee must:
- have positive net assets and be solvent at all times; and
- comply with the cash needs requirements; and
- comply with the audit and reporting requirements.
AFS Licensees need to continuously monitor their solvency positions, but ASIC does not expect the continuous monitoring of the net asset position. If, however, the AFS Licensee has doubts as to the net asset position, they must be more vigilant in monitoring.
For assistance in identifying the applicable financial resource requirements and/or developing and maintaining compliant financial policies and processes, contact QNA Consulting.