Asic regulated broker

Family VIII · Regulation

Not to be confused with forex broker, broker, broker insolvency.

ASIC regulated broker describes a broker whose financial services business is licensed and supervised by the Australian Securities and Investments Commission, Australia's corporate and financial markets regulator. The licence, known as an Australian Financial Services Licence (AFSL), sets conditions the firm must meet on an ongoing basis, including how client money is held and how disputes are handled. Whether a given broker holds such a licence, and what that licence permits it to offer, varies by firm and can be checked on ASIC's public registers.^[1]

What the licence covers

An AFSL is issued for specified classes of financial services and products. A broker may be licensed to deal in over-the-counter derivatives, in foreign exchange contracts, in securities, or in several of these at once, and the scope of the licence is not identical from firm to firm.

Obligations commonly attached to the licence include:

holding client money in segregated accounts, with reconciliation and audit requirements;
maintaining adequate financial resources and, where relevant, meeting minimum net tangible asset thresholds;
complying with conduct and disclosure rules, including general advice and personal advice distinctions;
membership of an external dispute resolution scheme for retail clients;
reporting breaches and significant events to ASIC.

Exact capital thresholds, reporting timeframes and dispute scheme arrangements are set by the regulator and change over time, so they should be confirmed against current ASIC guidance rather than assumed.

Worked example: checking a licence claim

A trader sees a broker advertise that it is "ASIC regulated". The claim is checked against the regulator's register rather than taken at face value.

Verifying an AFSL claim

Licence number quotedSearch ASIC registerRecord found

Licence holder nameCompare with broker's legal entityDifferent entity

Licence statusCheck current status fieldSuspended

ConclusionClaim not supported by registerNot currently ASIC regulated

The same check applies to any firm using the phrase: the licence number, the legal entity named on it, and its current status all have to match the broker being dealt with.

Scope and limits

ASIC regulation applies to the licensed entity and the activities covered by its licence. It does not extend to every product a group may distribute, to overseas affiliates operating under foreign licences, or to unlicensed introducers that refer clients to the firm.

Retail and wholesale clients are treated differently under the regime, and some protections attach only to retail clients. A firm may therefore be ASIC regulated for one part of its business while other parts fall under a different regulator or none at all.

Often confused with

forex broker: An ASIC regulated broker is defined by its licensing status, whereas a forex broker is defined by the market it serves, and a forex broker may be licensed by ASIC or by an overseas regulator; the visible sign is whether the entry describes a licence or a product market.
broker: A broker is any intermediary that executes transactions for clients, while an ASIC regulated broker is a subset of brokers whose Australian financial services are licensed by ASIC; the visible sign is the presence of a specific regulator and licence regime.
broker insolvency: Broker insolvency describes the failure and wind-up of a broker, whereas an ASIC regulated broker describes a licensing status that exists before any failure; the visible sign is whether the term refers to an ongoing regulatory condition or to an event.

References

↑ Australian Securities and Investments Commission, product intervention order on contracts for difference issued to retail clients, in force since March 2021. Australian retail clients; the order has been extended since it first took effect.

Family: VIII · Regulation · Index A–Z