The corporate regulator has detailed the process of cancelling a financial services license, reminding members of the parliamentary joint committee hearing tearing up a license is not straightforward and involves numerous checks and substantial costs that need to be recouped similar to any fee-for-service arrangement.

“It’s not just a case of relinquishing it,” explained ASIC’s chief operating officer Warren Day during a PJC hearing on ASIC’s oversight in November. “There are a number of things that need to be considered before ASIC will grant the cancellation of a licence. You don’t merely turn up and say, ‘I’ll stop business.'”

After a request from Adelaide MP Steve Georganas for more information about the license cancellation process, ASIC followed up the exchange with a detailed explanation, noting that a fee of $899 must be paid to ASIC before the cancellation request is processed.

Licensees must provide a reason for the cancellation and additional information as required, ASIC advises.

“There need to be a number of checks to see if there are other claims or other matters on hand, because if their licence is cancelled then the membership of AFCA disappears as well,” Day explained in November. “It may be that there are a number of matters still before the ombudsman that, if we cancelled the licence, would be interrupted by virtue of that. That’s one example.”

There are a number of things that need to be considered before ASIC will grant the cancellation of a licence, Day continued. In the follow up which was taken on notice and the hearing and published late December ASIC explained the type of checks that are associated with a license cancellation and contribute to the cost, including confirming that the application is “complete, accurate and duly authorised”, conducting “intelligence searches” to ascertain if there is a reason why the license shouldn’t be cancelled and checking with AFCA for open disputes.

“The problem when you use the word ‘licence’ is that you think it’s like you’re handing in your driver’s licence and you’re done,” Day commented in November. “There are a whole range of obligations that attach.

“Again, the model is a fee-for-service model,” the COO continued. “So, because there’s work involved with considering to grant the cancellation of a licence,  there’s a fee as a result.”