Hundreds of AFSLs changing hands with ‘minimal oversight’

Mike Taylor

Managing Editor and Publisher

11 July 2023

A key Parliamentary Committee has expressed concern “that hundreds of Australian Securities and Investments Commission (ASIC) licenses are being transferred yearly with minimal oversight”.

In a special report which grew out of the collapse of crypto-currency exchange, FTX Australia, the Parliamentary Joint Committee on Corporations and Financial Services said it was concerned at the number of licenses being transferred “with minimal oversight of whether the new owners have appropriate standing to hold an ASIC licence”.

It also noted that ASIC had not even been able to provide the committee with information on instances where an entity had acquired an ASIC licence through transfer when they had previously had a license application rejected or refused.

“The committee is concerned that hundreds of ASIC licences are being transferred yearly with minimal oversight of whether the new owners have appropriate standing to hold an ASIC licence,” the report said.

“The committee notes ASIC’s observation that it would require significantly more resources to assess all licence transfers, and there would be costs to licence operators in participating in the process.”

“To balance these concerns, the committee considers that, at a minimum, all high-risk licence transfers should be assessed by ASIC. The committee suggests that relevant high-risk licences are likely to include market licences, benchmark operator licences, clearing and settlement licences, and any AFSL or credit licence transfers that have high-risk features due to the scale or complexity of the service to be provided under the licence.”

“The committee also notes that ASIC suggested some legislative changes that would reduce the resource requirements for ASIC to assess licence transfers. The committee encourages the government to consider those suggested legislative changes.”

“The committee’s consideration of transfers of ASIC licences has raised further concerns, including that ASIC does not have sufficient resources to assess the new owners of transferred licences and was not able to provide the committee with information on:

• the economic incentives to buy rather than apply for ASIC licences;
• the number of credit licences that are transferred each year; and
• instances where an entity has acquired an ASIC licence through a transfer, where the entity previously had the same licence type application / assessment refused, withdrawn, rejected, cancelled, or suspended.

The committee is particularly concerned that ASIC did not know if any entities with unsuccessful licence applications or suspended licenses could subsequently have acquired a licence through a transfer.