ASIC licensing portal is old, application processing times raise concerns
A recently published report by the Australian Financial Regulator Assessment Authority (FRAA) includes an assessment of the Australian Securities and Investments Commission (ASIC) licensing process effectiveness.
There are two key legislative features of this licensing regime. First, once an application has been lodged that meets the legislative requirements, ASIC must grant a licence or registration unless it can substantiate grounds not to. This differs from some jurisdictions where regulators have more discretion when deciding to approve or deny licence applications.
Second, ASIC’s licences and registrations are point-in-time assessments. Once a licence is granted, except in limited circumstances, the licensee is not required to undergo periodic reassessment and indeed, the licence may be transferred to a third party at any time.
Applicants complete and lodge their licensing application via ASIC’s licensing portal. The portal is old and industry stakeholders highlighted the inability to upload documents to the portal and the cumbersome process to update licensee details.
In targeted interviews, industry commented that the portal was old and not intuitive, with one noting that the portal has not changed since 2008. Stakeholders noted that once an application has been lodged, the licensing portal does not update on the progress of applications. Applicants must seek to obtain updates directly from the licensing team, which the team is not always resourced to respond to.
Feedback from ASIC echoed these views. The ASIC staff survey found that software and digital tools for licensing activities are perceived by many staff as ‘ad hoc’ and ‘basic’. In a focus group with senior ASIC licensing staff members, it was suggested that a more automated portal presented a clear opportunity to reduce manual processing and address current gaps in the licensing workflow process.
The proposed new licensing portal is expected to provide a user-friendly experience for licensing applications or registrations. ASIC plans to commence its digital upgrade in 2022–23.
Timeliness of licensing application decisions was the main concern raised by licensing stakeholders. Several industry stakeholders commented that ASIC’s licensing processing times are too long. One stakeholder commented that it can be faster to take over a licenced entity than process a licence application with ASIC.
Submissions and comments made during targeted interviews criticised the processing times for more complex applications. For the 50% of applications that are not classified ‘low-risk’ the processing time is significantly longer than 90 days. The variation in processing times was noted in targeted interviews, where one industry stakeholder noted that low-risk applicants could be processed as quickly as a few weeks; while more complex applicants could wait for over a year without a resolution. Some stakeholders consider these timeframes unacceptable.
ASIC noted that there are only a small number of applications with a processing time of more than 300 days. In 2020–21, there were 29 applications awaiting a decision with a processing time of greater than 300 days, approximately 1.5% of total applications. In such cases ASIC may have intelligence concerns about the applicant (they may be under surveillance or subject to an impending enforcement proceeding), it may raise a policy consideration (which may be subject to public consultation by Government or ASIC), or the application may be incomplete and therefore not able to be finalised.
The FRAA questions whether ASIC’s licensing timeframes are keeping pace with timeliness expected. For example, there have been substantial service improvements by other government departments (Service NSW, Australian Taxation Office (ATO)) and the corporate sector.
Communication with ASIC during the application process was raised by industry stakeholders in both targeted interviews and the stakeholder survey. There were two areas of concern. Firstly, some reported frustration around the difficulties contacting ASIC, and a perceived lack of willingness by ASIC staff members to discuss their applications. Secondly, there was a perception that ASIC was unnecessarily formal in its communication.
Stakeholders held a general view that ASIC conducts robust and fair licensing assessments. Fifty per cent of stakeholders and 62% of ASIC staff surveyed agreed that ASIC conducts robust and fair assessments of licence applications. This was the most positive stakeholder response to the FRAA’s stakeholder survey.
Another way of assessing the outcomes from the licensing process is to analyse the appeals data – a high number of successful appeals would indicate ASIC is refusing too many applications. If the licensing team makes a recommendation to refuse an application, the applicant can withdraw their application or proceed to an ASIC hearing with an ASIC delegate for decision. The delegate’s decision is reviewable by the Administrative Appeals Tribunal (AAT).
Over the last 3 years, 833 AFSL applications have been refused, withdrawn or rejected. In the same period, 3 applicants had their applications decided by an ASIC delegate (all refused), and there have been 4 appeals decided at the AAT, all upholding ASIC’s decision to refuse a licence.
ASIC does not have a systematic process to review the quality of its licensing decisions. AAT reviews are recorded and used by ASIC to support its licensing decisions to providers. Currently ASIC does not track information to support its decisions as to whether recent licensees are operating competently and honestly. One way this could be done is by recording the level of reports of misconduct of recent licensees.
When requested by FRAA, ASIC provided a snapshot on reports of misconduct of recently granted licensees. From 1 July 2019 to 29 April 2022, ASIC granted 939 new AFSLs. Of these, 71 licensees (7.6%) had been subject to reports of misconduct, and of those, only 3 licensees (0.3%) were subject to enforcement investigations.