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A thriving secondary market for AFS licences, credit licences and Responsible Managers exists in Australia.

Foreign exchange businesses can command ludicrously high sums for AFS licences for these rare and hard-to-get authorisations. Seven figure sums are not unheard of for a bare company with no clients and no other assets!

Confronted with the fact that obtaining a new licence from scratch might take up to 12 months, international businesses that want to launch in Australia will explore buying a licence.

Fintech businesses are also turning to RMs-for-hire as they face the reality that the vast tech knowledge of their founders won’t qualify them to be Responsible Managers—and they aren’t the only ones. Responsible Managers with managed investment scheme experience (especially custodial experience) and certain FX experience are hard to find. This means people who can fill those roles can command top dollar for their services - and they do.

What's fuelling demand?

The most significant reason is ASIC’s processing times. New credit licence applications currently take more than 6 months to process from the time of lodgement, while AFS licences take between 8 and 12 months to process.

ASIC has also contributed to the market for Responsible Managers. Their rigid assessment criteria for AFS and credit licences make it challenging for even some highly competent senior executives to demonstrate sufficient experience and skills. This means it’s almost impossible for the founder of a fintech business with little or no financial services experience to comply even though they are innovative, driven and highly skilled in technology.

A combination of other factors is also contributing to the demand for licences and Responsible Managers, including:

  • The growth in managed investment, property and mortgage schemes;
  • The advent of conflicted remuneration, which is driving financial planners to establish their own in-house investment services; and
  • Innovative lenders who are establishing their own schemes to raise capital.

There’s no sign of market demand easing

While ASIC’s licensing timeframes have eased in the last 6 weeks, the secondary market for licences with FX and derivatives authorisations is likely to stay strong. Established overseas businesses are entering the Australian market and will continue to create demand to meet their specific launch dates.

And as the fintech movement gains further momentum the market for Responsible Managers is also likely to continue to grow in the near future.

Businesses who are considering obtaining a licence should seek advice early to ensure they have sufficient time to find Responsible Managers if needed. It's wise to allow at least 8 months to apply for a licence or locate and acquire a licensee.

If you need any assistance in any of these areas, please contact us.

Author: Jaime Lumsden Kelly & Sónia Cruz

August 2017

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