In order to provide advice regarding, or buy or sell on behalf of clients, financial products (i.e. shares, derivatives etc.), or operate a managed investment scheme, an Australian Financial Services Licence (AFSL) is usually required.

In order to provide credit advice, secure obligations under or assist a person to enter, credit contracts or consumer leases, a Credit Licence (CL) is generally required.

The Problem

Obtaining an AFSL or CL can be a cost-laden exercise which may not be feasible for startups, who would rather contribute their scarce resources to the development of their products or services.

The Alternative

ASIC introduced the Fintech Licensing Exemption (FLE) as part of ASIC’s Regulatory Sandbox to enable fintech businesses (particularly startups) to innovate and commercialise their products and services, to avoid the time and costs often associated with adhering to the stringent Australian regulatory landscape, and to enable startups to go to market quicker.

The FLE may allow you to provide financial services or credit services for a 12-month period, without an AFSL or CL, such as certain financial services capped at $10,000 or certain credit services capped at $25,000 per customer, provided that you:

You must not be an existing holder of an AFSL or CL (or be an authorised representative).

You must not be banned from providing financial or credit services to customers.

You must not offer products or services to more than 100 retail clients (unlimited wholesale) or have a total exposure of more than $5 million.

You will need to adhere to certain general conduct and disclosure requirements while relying on the FLE.

You will need to provide ASIC with certain information to show that you are of good standing (such as police checks).

You will need to notify customers that your products or services are provided under the FLE and normal AFSL and CL protections do not apply.