The changing Australian Regulatory environment

It’s not that long ago that AFS licenses were changing hands for a few hundred grand but recently we’ve heard of licenses being bought for over A$3.5 million. The main reason behind this massive price spike has been demand from Chinese FX and derivative brokers; they don’t have their own regulatory body so an AFSL has become almost a default option (either a full license or a CAR).

Adding more heat to the demand for an AFSL, ASIC have not been approving many new applications and have even been stripping some existing license holders of their privileges.

The Hayne commission report has ushered in many recommendations and it seems that the whole AFSL area will not be immune to changes. ASIC will continue to come down hard on non-compliant license holders and I hear that they are becoming much more stringent on the criteria for granting CARs. But I also hear that they are going to be more open to granting well-presented local AFSL applications in the hope that this will take the heat out of the secondary market.

My personal opinion is that their next step will be to follow the FCA lead and limit leverage to a significant extent for retail participants and try to keep market access to sophisticated participants only.