15 Jan 2010

2010 - A challenging year for financial service providers

by Randal Dennings, Graeme Howatson

Welcome to 2010, a year of many compliance challenges for financial services providers.

Legislation update

A number of important Bills were introduced into Federal Parliament in 2009. The status of these Bills and the dates on which the various legislative provisions come into operation are set out below:


Implementation dates

Corporations Legislation Amendment (Financial Services Modernisation) Act 2009

(Margin lending)

  • From 1 February 2010, ASIC will accept AFSL applications, or applications to vary an existing AFSL, from margin lenders or margin loans advisers.
  • Existing margin lenders and margin loans advisers must apply for an AFSL by 30 June 2010.
  • From 1 January 2011, the provisions of the Corporations Act 2001 apply to margin lenders and margin loans advisers.
  • From 1 July 2011, entities and individuals that provide financial product advice on margin lending facilities must comply with the training standing standards in ASIC Regulatory Guide 146.

National Consumer Credit Protection Act 2009

  • Between 1 April and 30 June 2010, persons engaged in "credit activities" must apply to ASIC for registration if they wish to continue to engage in credit activities after 30 June 2010.
  • Registered persons must apply for a credit licence between 1 July and 31 December 2010.

Trade Practices Amendment (Australian Consumer Law) Bill

The unfair contracts provisions of the Bill are expected to commence on 1 July 2010, although the Bill is yet to be passed by Federal Parliament.


If you haven't already done so, now is the time to consider the impact of this legislation on your organisation. Here are some initial steps you can take and issues you may wish to consider:

Margin lending

Most margin lenders and margin loans advisers supply or advise on other financial products and as a result, will already hold an AFSL. If this applies to you, you can apply to vary your existing licence to include margin lending by completing and lodging ASIC form FS03 online.

Regulatory Guide 2 AFS Licensing Kit: Part 2 - Preparing your AFS licence application and Regulatory Guide 3 AFS Licensing Kit: Part 3 - Preparing your additional proofs have been updated to take into account the inclusion of margin lending facilities as a financial product.


The first step is to determine whether or not a credit licence is required. ASIC Regulatory Guide 203 Do I need a credit licence explains what constitutes "credit activities".

Regulatory Guide 202 Credit registration and transition details the registration process. RG 202 suggests that applicants take the following steps before they begin preparing their application:

  • If you are a company or an AFS licensee, make sure your details on ASIC's registers are correct. An online application for registration cannot be completed until the registers are up to date.
  • Become a member of an ASIC approved external dispute resolution (EDR) scheme. An applicant cannot complete their application until they are a member of an EDR scheme.
  • In the registration application, you will need to make statements about the past conduct of directors, company secretaries, partners and trustees. In order for an applicant to be able make these statements, background checks of directors, company secretaries, partners and trustees must be conducted prior to completing the application.

It is important to note that unless ASIC has approved your application for registration by 30 June 2010, you will not be able to continue to engage in credit activities after this date. ASIC has stated that if an application for registration is lodged by 18 June, it will be able to make a decision on that application by 30 June 2010.

Unfair contracts

The Trade Practices Amendment (Australian Consumer Law) Bill, which prohibits unfair contracts, is yet to pass Federal Parliament. This means there may only be a few months between the passing of the legislation and the provisions coming into force. Given the difficulties this may pose, here are some suggested steps you can take now to prepare for the new requirements:

  • Collate all contracts currently used in consumer transactions. The new legislation will only apply to standard form "consumer contracts" - that is, contracts for the supply of goods or services or the sale or grant of an interest in land to an individual who makes the acquisition wholly or predominantly for personal, domestic or household use or consumption.
  • Identify provisions in these contracts that may require revision, based on the requirements of the Bill.
  • Consider the timeframe and resources you will require to comply with the legislation, once the Bill is passed.

More changes are on the way

In addition to those discussed above, further legislative changes affecting financial services providers are expected in 2010. For example, this year the Federal Government is expected to introduce legislation to implement the first stage of amendments to the Privacy Act 1988. These amendments will include amendments allowing for more comprehensive credit reporting.

We look forward to keeping you informed of new developments as and when they occur.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.