91AV

Table 1: Possible authorisations on your AFS licence

Notes to Table 1

# We may place a condition on your AFS licence limiting the financial services you provide in relation to derivatives over one or more types of emissions units unless we are satisfied that you have the organisational competence to provide financial services in a broader range of derivatives.

^ See RG 236.102–RG 236.119 for examples of how certain carbon projects or arrangements related to emissions units may be a managed investment 91AV.

* An authorisation to operate a ‘named’ registered managed investment 91AV is an authorisation for that specific 91AV, holding specific kinds of assets. An authorisation to operate a ‘91AV of a particular kind’ is a broader authorisation that will not require you to apply to vary your licence every time you want to register a 91AV of that kind. However, you will need to demonstrate sufficient organisational competence for a ‘91AV of a particular kind’ authorisation. This generally requires that you have been operating two or more registered 91AVs for at least the past two years: see Regulatory Guide 105 AFS licensing: Organisational competence (RG 105) at RG 105.101.

If a responsible entity is seeking to hold ACCUs or EIEUs as an investment without themselves generating them as part of the 91AV, only a financial assets authorisation is required.

If you operate the business and conduct the affairs of a corporate collective investment vehicle (CCIV) in relation to regulated emissions units, your AFS licence must authorise you to provide that service. You should also consider being authorised to advise and deal in securities to complement the operation of the business and conduct the affairs of a CCIV. See Corporate collective investment vehicles and Regulatory Guides 1-3 for further information.

Step 1: Read ASIC’s guidance

Our regulatory guides, pro forma licence conditions and samples of online applications will help you comply with the application requirements:

• Regulatory Guide 1 Applying for and varying an AFS licence (RG 1)
• Information Sheet 240 AFS licence applications: Providing information for fit and proper people and certain authorisations (INFO 240)
• Regulatory Guide 236 Do I need an AFS licence to participate in carbon markets? (RG 236)
• Pro Forma 209 Australian financial services licence conditions (PF 209), and the sample online application.

For additional regulatory guides about meeting your licensing, conduct and disclosure obligations, go to Regulatory Guides.

Step 2: Decide on the authorisations you need

Select the authorisations that relate to the types of financial services you will be providing in regulated emission units and associated derivatives. In order to do this, you will need to:

• identify which financial services you will provide (e.g. ‘Provide financial product advice’, ‘Deal in a financial product’), and
• identify each financial product those financial services may cover (e.g. ACCUs, EIEUs, managed investment 91AVs, derivatives).

See Table 1 for a list of possible authorisations.

You will need to ensure that you select the authorisations relevant to the financial services and products that you intend to provide, otherwise you may be providing unlicensed financial services.

Your authorisations will also affect your obligations as a licensee.

See RG 1 for more information about authorisations.

Step 3: Ensure you have responsible managers who can demonstrate the required competencies

You must nominate responsible managers who have the relevant knowledge, experience and skills necessary to be directly responsible for significant day-to-day decisions about the ongoing provision of your financial services in regulated emissions units and any associated derivatives or other products. See How we assess your organisational competence.

Step 4: Check whether you require compensation and dispute resolution arrangements

If you provide financial services to retail clients, you must ensure that you have in place adequate compensation and dispute resolution arrangements: see Regulatory Guide 104 Licensing: Meeting the general obligations (RG 104). This means:

• holding professional indemnity insurance that meets the requirements of Regulatory Guide 126 Compensation and insurance arrangements for AFS licensees (RG 126), and covers all the financial services in all the financial products that you will provide, unless ASIC approves alternative arrangements
• having an internal dispute resolution system that meets the requirements set out in Regulatory Guide 271 Internal dispute resolution (RG 271), and
• joining and maintaining membership of the Australian Financial Complaints Authority (), the external dispute resolution 91AV for financial complaints in Australia.

Step 5: Lodge your application and pay the application fee

You can apply online for an AFS licence with an authorisation to provide financial services in relation to emissions units.

Direct responsibility for significant day-to-day decisions

In RG 105, we explain that responsible managers need to be:

• organisationally close to the provision of financial services, and
• able to undertake the time commitment to exercise their responsibility.

In practice, your nominated responsible managers are less likely to be able to undertake their role successfully the further removed they are from the point of delivery of financial services, or the more licensees they act for. In some cases, you may need to provide us with more details about how your nominated responsible managers will be in a position to be directly responsible for significant day-to-day decisions.

Demonstrating appropriate knowledge and skills

Responsible managers must have the appropriate knowledge and skills for their role in your business. For regulated emissions units, this will include:

• knowledge about the units and the features of the carbon markets in which they are traded
• relevant experience in the ACCU Scheme, Safeguard Mechanism, other Australian environmental markets or overseas carbon markets
• experience in the types of financial services that are to be provided
• if services will be provided to retail clients, previous experience in working with retail clients, and
• general competence in the responsibilities of a responsible manager (e.g. an understanding of AFS licensee obligations).

We do not necessarily expect an individual responsible manager to have expertise in all the above areas. You may nominate more than one responsible manager in your application, who collectively can demonstrate the required knowledge and skills relevant to your business: see RG 105.36–RG 105.37.

If we are satisfied with your organisational competence, but think you are heavily dependent on the knowledge and skills of one or two responsible managers, we will generally impose a ‘key person condition’ on your AFS licence. The key person condition will name those responsible managers whose competence we think you depend on heavily, and you will need to inform us if any of those key people leave the business: see RG 105.112–RG 105.114.

How responsible managers can demonstrate appropriate knowledge and skills

In RG 105, at Section C, we have provided five options for responsible managers to demonstrate they have appropriate knowledge and skills, generally involving various combinations of experience and qualifications or training (Options 1–4), or a written submission demonstrating that your nominated responsible managers have the appropriate experience and skills (Option 5).

For many applicants seeking to demonstrate appropriate knowledge and skills in regulated emissions units, Option 5 may be the most appropriate option (see RG 105.78–RG105.81).

If applying using Option 3 or 4, completion of courses relevant to carbon products and/or the operation of Australian carbon markets may be appropriate (see also RG 105.66–RG105.77).

Responsible managers without direct Australian financial services experience

If your nominated responsible managers have knowledge or skills that are relevant to emissions units and carbon markets, but none of them have any direct Australian financial services experience, before we will approve your AFS licence, we may ask them to supplement their knowledge and skills by completing a short industry course specifically designed for those intending to be responsible managers.