AFSL Misconduct Investigations: What ASIC Looks For and How the Process Works

AFSL misconduct refers to breaches of obligations by Australian Financial Services Licence holders, including failures in compliance, governance, reporting, or conduct obligations under the Corporations Act. ASIC closely monitors AFSL holders and investigates issues ranging from poor systems and controls to deliberate misconduct. This page explains how these investigations begin and what to expect.

What Counts as AFSL Misconduct?

AFSL obligations arise from the Corporations Act 2001 (Cth) and include:

• acting efficiently, honestly and fairly (s 912A)
• maintaining adequate financial and human resources
• having proper risk management systems
• ensuring representatives are adequately trained
• lodging breach reports on time (s 912D)
• complying with licence conditions
• supervising authorised representatives
• avoiding misleading or deceptive conduct

Breaches can be unintentional or deliberate.

How ASIC Detects AFSL Misconduct

ASIC receives intelligence from:

• mandatory breach reports
• client complaints
• whistleblowers
• AUSTRAC and ATO referrals
• surveillance visits
• thematic reviews
• AFCA decisions
• licensee audits

Issues commonly include:

• poor compliance frameworks
• unlicensed advice
• conflicted remuneration
• misleading disclosure documents
• inappropriate product recommendations
• weak AML/CTF systems

How an AFSL Investigation Begins

An AFSL investigation often starts with:

• a breach report lodged by the licensee
• a tip-off from a representative or client
• results of a thematic review (e.g. crypto, CFDs, managed investment schemes)
• concerns arising during ASIC supervision
• a failed audit or AFCA determination

ASIC may issue:

• s 33 Notice to Produce Books
• s 912C direction to provide information
• s 19 Examination Notice for individuals
• Record of Interview invitations

What ASIC Investigates in AFSL Matters

Key areas include:

• governance failures
• conflicts of interest
• inadequate training & supervision
• poor financial services advice
• false or misleading statements
• responsible manager failures
• unlicensed conduct
• AML/CTF failures

ASIC examines policies, procedures, training records, compliance manuals, and client files.

Consequences of AFSL Misconduct

ASIC may:

• issue a stop order
• impose licence conditions
• suspend or cancel the AFSL
• ban individuals from providing financial services
• pursue civil penalty proceedings
• refer individuals for criminal prosecution

Administrative actions (banning orders) are common in AFSL matters.

Compulsory Examinations in AFSL Investigations

ASIC often compels directors, responsible managers, or representatives to attend s 19 examinations when investigating systemic issues or conduct breaches. Examinations are private and require full cooperation.