ASIC takes away licenses of firms over lack of AFCA membership

Maria Nikolova

This is the first time ASIC has cancelled licences for non-compliance with AFCA membership requirements.

Sydney Australia

The Australian Securities and Investments Commission (ASIC) has demonstrated that firms’ membership in the new dispute resolution scheme is crucial. Earlier today, the regulator has announced that it has cancelled the Australian financial services (AFS) licences of two financial services providers due to their failure to become members of the Australian Financial Complaints Authority (AFCA) scheme.

The businesses whose licenses got taken away are both NSW-based. Sydney Business Accounting’s licence cancellation took effect on February 14, 2019, and A G Calleia & Co’s licence was cancelled on February 15, 2019.

AFCA, the new one-stop financial services dispute resolution scheme, opened for business on November 1, 2018 replacing the three existing schemes: the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman (CIO) and the Superannuation Complaints Tribunal (SCT). All AFS licensees, Australian credit licensees, superannuation trustees and other financial firms that provide services to retail clients were required to become members of AFCA by September 21, 2018.

In October 2018, ASIC warned that not all firms had acted to join the new single dispute resolution scheme. There are more than 300 licensed financial firms who are still to join, and most of these are credit licensees who were previously members of the Credit and Investments Ombudsman, ASIC said back in October.

If licensees were not a member of AFCA as at September 21, 2018 they are in breach of their licence obligations and ASIC can immediately commence action to suspend or cancel their licence For credit representatives, if they are required to join AFCA but do not do so by 1 November 2018, their authorisation will become invalid and they will need to cease engaging in credit activities.

ASIC Commissioner Danielle Press said, ‘These cancellations are significant because this is the first time ASIC has cancelled licences for non-compliance with AFCA membership requirements.

‘AFCA is crucial to the protection of Australia’s financial consumers. Licensees need to be aware that failure to meet AFCA membership requirements is a serious breach of the law and ASIC will take action where licensees fail to meet this important obligation.’

Sydney Business Accounting and A G Calleia & Co had also failed to lodge their annual financial statements with ASIC. Sydney Business Accounting subsequently took steps to comply with financial reporting obligations when ASIC raised concerns.

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