AFSL Compliance Obligations

What Australian financial services licensees must do to maintain compliance

What is an AFSL?

An Australian Financial Services Licence (AFSL) authorises a licensee to provide financial services. Under section 912A of the Corporations Act, licensees have general obligations to provide services efficiently, honestly and fairly; maintain adequate resources; implement robust risk management systems; and ensure representatives are competent and adequately trained.

RG 104 — General Obligations

Regulatory Guide 104 (RG 104) expands on s912A, describing ASIC expectations for compliance frameworks, responsible manager coverage, monitoring and supervision, and breach management. Regular compliance reviews are expected, and licensees should maintain documented policies and procedures.

RG 105 — Organisational Competence

Regulatory Guide 105 (RG 105) sets out ASIC expectations for organisational competence, including the role of responsible managers, their fitness and propriety, and the requirement for adequate supervision arrangements across the licensee business.

Breach Reporting

Licensees must report significant breaches or likely breaches to ASIC under section 912D. The reportable situations regime requires rectification within 30 days in some cases. AdviserCheck helps identify potential compliance issues through comprehensive document analysis.

Core AFSL Compliance Obligations

An Australian Financial Services Licence (AFSL) imposes a range of obligations on the licensee under the Corporations Act. The core obligations include: providing financial services efficiently, honestly and fairly (section 912A); maintaining adequate financial resources (including cash reserves and PI insurance); ensuring that authorised representatives are adequately trained and competent; and maintaining proper organisational competence.

Licensees must also have adequate dispute resolution systems (including internal dispute resolution and membership of AFCA), manage conflicts of interest, and ensure that all representatives comply with financial services laws. The "fit and proper" person test applies to key personnel, and the licensee must notify ASIC of any significant changes to its business operations or key personnel.

Authorised Representative Obligations

AFSL holders are responsible for the conduct of their authorised representatives, who provide financial advice on behalf of the licensee. The licensee must have adequate supervision arrangements in place, including monitoring of advice documents, regular audits, and a compliance framework. The responsible manager (nominated under RG 105) oversees the licensee's compliance with its obligations.

The breach reporting regime (introduced in 2022) requires AFSL holders to report significant breaches to ASIC within 30 days and all other reportable breaches within 90 days. A breach is "significant" if it has resulted in, or is likely to result in, substantial loss to clients or indicates a systemic issue. Failure to report breaches can result in enforcement action by ASIC.

Ongoing Compliance and ASIC Oversight

AFSL compliance is not a one-off exercise — it requires ongoing monitoring, reporting, and improvement. Licensees must lodge annual financial accounts and audit reports with ASIC, maintain a compliance breach register, and conduct regular compliance reviews. ASIC conducts proactive surveillance and may request information at any time. The cost of maintaining an AFSL (including compliance, audit, and ASIC levies) can be substantial.

For consumers, the AFSL structure provides important protections. You can check an adviser's licence details on the ASIC Financial Advisers Register, confirm that the licensee holds adequate PI insurance, and access the compensation scheme of last resort (CSLR) if you suffer loss due to failed licensee misconduct. These protections are why you should always verify that your adviser is authorised under a valid AFSL before receiving advice.

Frequently Asked Questions

How do I check if an adviser holds a valid AFSL?
Search the ASIC Financial Advisers Register online at https://www.asic.gov.au. You can search by the adviser's name or AFSL number. The register shows the adviser's licence status, the services they are authorised to provide, and any disciplinary history.

What is the compensation scheme of last resort?
The Compensation Scheme of Last Resort (CSLR) provides compensation of up to $150,000 per claimant for losses suffered due to failed financial services licensees who cannot pay compensation themselves. The scheme is funded by levies on the financial services industry.

How often must AFSL holders report to ASIC?
AFSL holders must report significant breaches within 30 days, other reportable breaches within 90 days, and must lodge annual financial reports and audit reports with ASIC. ASIC may also request ad hoc reports or conduct onsite visits.

What happens if an AFSL holder breaches their obligations?
ASIC has a range of enforcement powers including issuing infringement notices, accepting enforceable undertakings, imposing licence conditions, suspending or cancelling the AFSL, and seeking civil penalties through the courts. Serious misconduct can result in criminal prosecution.

ASIC's Recent Crackdown, By Theme

The numbers. Financial year 2024-25 delivered 19 criminal convictions, 38 new civil proceedings, $104.1 million in penalties and bans or restrictions against 58 individuals or companies. Investigation volume rose roughly 50% on the prior year — evidence, in ASIC's words, of a "more confident and ambitious regulator."

Failed investment schemes. The Shield Master Fund episode dominated: receivers were appointed in 2024-25 amid concerns about inappropriate advice and inadequate disclosure, and the fund was wound up. Four MWL Financial Services advisers were banned for 4–8 years in 2025 for steering clients into it against their best interests.

Dishonest operators. Glenda Rogan copped a 10-year ban in 2025 for funneling $14.8 million of client funds into a cryptocurrency investment scam; Barry King was permanently banned the same year for dishonest conduct, misuse of client funds and providing false documents.

Systemic breaches. Fees-for-no-service failures triggered multiple actions against licensees and advisers — Crown Wealth Group director Andrew Moore was banned for failing to report such conduct — while licensees including Skye Money and Smart Financial Capital paid $31,300 infringement notices for allowing unregistered advisers to operate.

ASIC additionally flags unscrupulous models that target superannuation savings through high-pressure selling and promises of superior returns.

Source material: ASIC Annual Report 2025; ASIC Financial Advice Update, August 2025.

Regulatory Context

Consumers evaluating advice documents benefit from knowing the recent timeline. Since FOFA took effect in 2013, advisers have owed a best interests duty and been barred from conflicted remuneration. The DBFO reforms, phased through 2024-25, removed the Fee Disclosure Statement and simplified ongoing fee consents while clarifying how advice fees can be deducted from super. Further change is queued: the Quality of Advice Review’s proposals for simpler SOAs and a new adviser class were progressing through draft Tranche 2 legislation as of March 2025.