ASIC has released its latest guidance, this time clarifying the financial requirements under which Australian financial services (AFS) licensees must comply as part of their obligations.
Regulatory Guide 166 Licensing: Financial requirements (RG 166) sets out the financial requirements the regulator has set for licensees, according to the types of financial services and products that they provide.
These include: a solvency and positive net assets requirement; a cash needs requirement; and audit requirement.
“You can only comply with your obligations as an AFS licensee if you have the resources, including financial resources, to do so,” states the guidance.
“The financial resources you have must be enough to cover any risks your business faces that may affect your cash position and that it is reasonable for you to plan to manage.”
The regulator is in the process of reviewing the requirements applying to different types of licensees, with RG 166 released to provide clarity and ensure it is easier for licensees to determine where they fit.
Major changes include:
- updated requirements for responsible entities, which were announced in November 2011, and updated in October 2012, and which have become effective as of November 1, 2012;
- new requirements for issuers of over-the-counter derivatives to retail clients — these were previously released in Regulatory Guide 239 Retail OTC derivative issuers: Financial requirements (RG 239), but have now been incorporated into RG 166, and RG 239 will be withdrawn, and;
- new guidance on financial requirements for market participants, to reflect changes to the way these AFS licensees are regulated since ASIC assumed responsibility for supervising market participant capital requirements from ASX on August 1, 2011.
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