ASIC RG 167 — ASIC Regulatory Guide – RG 167 AFS licensing: Discretionary powers

Page 1 REGULATORY GUIDE 167 AFS licensing: Discretionary powers July 2022 About this guide This guide is for Australian financial services (AFS) licensees and financial services providers. It explains:  how we use our powers to impose AFS licence conditions to support the AFS licensee obligations under the Corporations Act;  our approach to applications for relief from compliance with Pts 7.6–7.8 (other than Divs 4 and 8 of Pt 7.6) of the Corporations Act;  how you can apply for relief; and  our approach to relief for securitisation special purpose vehicles and for providers of generic financial calculators (excluding superannuation calculators). Page 2 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 2 About ASIC regulatory documents In administering legislation ASIC issues the following types of regulatory documents. Consultation papers: seek feedback from stakeholders on matters ASIC is considering, such as proposed relief or proposed regulatory guidance. Regulatory guides: give guidance to regulated entities by:  explaining when and how ASIC will exercise specific powers under legislation (primarily the Corporations Act)  explaining how ASIC interprets the law  describing the principles underlying ASIC’s approach  giving practical guidance (e.g. describing the steps of a process such as applying for a licence or giving practical examples of how regulated entities may decide to meet their obligations). Information sheets: provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. Reports: describe ASIC compliance or relief activity or the results of a research project. Document history This guide was issued in July 2022 and is based on legislation and regulations as at the date of issue. In April 2026, we updated references to reflect renamed regulatory guidance and legislative instruments and made further minor updates to remove out-of-date information. Previous versions:  Superseded Regulatory Guide 167, amended August 2015, reissued April 2016, December 2016 and June 2019  Superseded Policy Statement 167, issued November 2001, reissued May 2005, amended October 2005, November 2005, December 2005 and January 2007, and rebadged as a regulatory guide 5 July 2007 Disclaimer This guide does not constitute legal advice. We encourage you to seek your own professional advice to find out how the Corporations Act and other applicable laws apply to you, as it is your responsibility to determine your obligations. Examples in this guide are purely for illustration; they are not exhaustive and are not intended to impose or imply particular rules or requirements. Page 3 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 3 Contents A Overview ........................................................................................... 4 Relief from the licensing provisions ................................................... 4 Purpose of this guide ......................................................................... 4 Related guidance ............................................................................... 4 B Our approach to AFS licence conditions and to relief from the licensing provisions ........................................................................ 5 Our approach to AFS licence conditions ........................................... 5 Our powers to give relief .................................................................... 5 Factors we consider when exercising our relief powers .................... 6 Our powers of exemption or declaration............................................ 8 C How to apply for relief ..................................................................... 9 Making an application for relief .......................................................... 9 What to include in your application .................................................... 9 D Securitisation special purpose vehicles ..................................... 11 The securitisation industry ............................................................... 11 Our relief for certain securitisation entities ...................................... 13 Case-by-case relief for securitisation managers ............................. 17 E Generic financial calculators ........................................................ 18 What is a generic financial calculator? ............................................ 18 Our relief for providers of generic financial calculators ................... 19 Our conditions of relief ..................................................................... 20 Calculators not covered by our relief for generic financial calculators 29 Key terms ............................................................................................... 32 Related information ............................................................................... 35 Page 4 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 4 A Overview Relief from the licensing provisions RG 167.1 A person who carries on a financial services business in Australia must comply with Pts 7.6–7.8 of the Corporations Act 2001 (Corporations Act), unless an exemption applies. RG 167.2 Parts 7.6–7.8 contain the key licensing, conduct and disclosure requirements that apply to providers of financial services, including the requirement to hold an Australian financial services (AFS) licence that covers the provision of the financial services: see s911A. RG 167.3 We will consider giving relief to address atypical or unforeseen circumstances and unintended consequences of the licensing provisions in Pts 7.6–7.8 (other than Divs 4 and 8 of Pt 7.6) (licensing provisions). We may give relief on our initiative or on application. Note: In this guide, all references to sections (s), divisions (Div), chapters (Ch) and parts (Pt) are to the Corporations Act unless otherwise specified. Purpose of this guide RG 167.4 This guide explains: (a) how we use our powers to impose licence conditions to support the AFS licensee obligations under the Corporations Act (see Section B); (b) our approach to applications for relief from compliance with the licensing provisions (see Section B); (c) how you can apply for relief (see Section C); (d) our policy on relief for securitisation special purpose vehicles (see Section D); and (e) our policy on relief for providers of generic financial calculators (excluding superannuation calculators) (see Section E). Note: For information about changes to the relief we give to providers of superannuation calculators, see RG 167.122–RG 167.127 and Regulatory Guide 276 Superannuation forecasts: Calculators and retirement estimates (RG 276). Related guidance RG 167.5 This guide should be read in conjunction with other guides we have issued on how we will administer the licensing provisions, which can be found on our website at Regulatory resources. We have also listed some of our relevant guidance in the ‘Related information’ section at the end of this guide. Page 5 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 5 B Our approach to AFS licence conditions and to relief from the licensing provisions Key points This section explains how we use our powers to impose licence conditions to support the AFS licensee obligations under the Corporations Act. It also explains the factors we consider when deciding whether to exercise our powers to give relief from the licensing provisions, and our powers of exemption and declaration (to enable modifications of the Corporations Act). Applicants seeking relief should provide the information that is set out in this section. Our approach to AFS licence conditions RG 167.6 We impose licence conditions to support AFS licensee obligations under the Corporations Act. We impose licence conditions in order to specify the way in which we believe an AFS licensee must comply with their obligations. The licence conditions support our guidance on minimum expectations for compliance with the licensee obligations where appropriate. RG 167.7 We only impose licence conditions if the advantages (for the AFS licensee and ASIC) in terms of certainty justify imposing such licence conditions. RG 167.8 We have imposed standard licence conditions for all AFS licensees and other standard licence conditions for particular classes of licensee. Among other things, these licence conditions specify the particular financial services or class of financial services that the licensee is authorised to provide. Pro Forma 209 Australian financial services licence conditions (PF 209) contains more information about our standard licence conditions. RG 167.9 We will continue to review and, if appropriate, vary our standard licence conditions. We may also impose additional licence conditions for particular AFS licensees (e.g. if we consider this will promote compliance with the licensee obligations, given the particular circumstances or conduct of the licensee). Our powers to give relief RG 167.10 We will consider giving relief to address atypical or unforeseen circumstances and unintended consequences of the licensing provisions. Relief is provided under s911A(2), 926A, 951B and 992B: see RG 167.19– RG 167.21. We may give relief on our initiative or on application. Note: For a discussion of our approach to relief from Div 8 of Pt 7.8, see Regulatory Guide 169 Hawking and disclosure: Discretionary powers (RG 169). Page 6 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 6 RG 167.11 Our powers to give relief allow us the flexibility to give partial or complete relief from the licensing provisions (including with conditions). The kind of relief we give (if any), the extent of the relief and the situations in which the relief applies will depend on what is appropriate in the circumstances. RG 167.12 When considering whether to use these powers to give relief, we will keep in mind the regulatory goals of: (a) promoting consumer confidence in using financial services (including informed decision making); (b) promoting the provision of efficient, honest and fair financial services by all AFS licensees and their representatives; and (c) supporting confident use of financial markets by consumers and market participants. RG 167.13 We suggest that applicants address these goals in their applications. Factors we consider when exercising our relief powers RG 167.14 Factors that we may consider when deciding whether to exercise our relief powers include whether: (a) strict compliance with the financial services regime would be impossible or disproportionately burdensome; (b) persons to whom financial services are provided would still have the protection intended by Parliament; (c) those to whom the relief applies (e.g. the applicant) will receive any benefits; (d) a reasonable person would think that the predominant purpose of the product to which the service relates is not a ‘financial product purpose’ (see RG 167.15–RG 167.17); (e) the service is subject to ‘adequate’ alternative regulation (see RG 167.18); (f) the likelihood and extent of potential client and especially retail client detriment resulting from the proposed relief is minimal; and (g) the service is only provided to wholesale clients or, in some cases, only to professional investors (as defined in s9). Note 1: The above list is not exhaustive. Relevant considerations will always depend on the applicable facts and circumstances. How much weight is given to any particular item in the list or any other relevant consideration will depend on the circumstances. Note 2: The consideration in RG 167.14(g) is unlikely of itself to be a sufficient basis for relief due to the legislative policy of requiring licensing for financial services businesses where the only clients are wholesale clients and financial services market integrity considerations. Page 7 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 7 Financial product purpose RG 167.15 In making a decision about relief, we may consider whether a reasonable person is likely to think that the predominant purpose of the product to which the service relates is a ‘financial product purpose’: see RG 167.14(d). If we consider this is likely, we may decide not to give relief. RG 167.16 A financial product purpose is a purpose of: (a) making a financial investment; (b) managing a financial risk; or (c) making non-cash payments (see s763A). RG 167.17 When determining whether there is a financial product purpose, we anticipate that a reasonable person would be influenced by all of the facts and circumstances surrounding the product, including whether the product involves: (a) a promise to make future monetary payments (e.g. deposit products and debentures); (b) the pooling or management of funds to produce a return (e.g. managed investment schemes and superannuation); (c) the pooling or management of funds to reduce a risk (e.g. insurance); (d) a promise used to manage the financial consequences if a particular circumstance occurs, rather than prepayment for future services (e.g. insurance and derivatives); or (e) a promise to settle transactions for the benefit of the client, particularly where the service enables the client to pay a wide variety of third parties (e.g. non-cash payment facilities such as direct debits and smart cards). Note: The above list is not exhaustive. Relevant considerations will always depend on the applicable facts and circumstances. ‘Adequate’ alternative regulation RG 167.18 When considering whether an alternative regulatory regime is ‘adequate’ (see RG 167.14(e)), we will generally consider whether (and how effectively) the regime addresses: (a) efficient, honest and fair service provision; (b) service provider resources and competence; (c) compliance, conflicts management and risk management practices by service providers; (d) initial and ongoing disclosure to retail clients about the provision of a service; (e) protection of client assets; Page 8 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 8 (f) financial and transaction record keeping; (g) access by retail clients to internal and external dispute resolution services; and (h) the provision of any advice to retail clients on a reasonable basis. Note: The above list is not exhaustive. Relevant considerations will always depend on the applicable facts and circumstances. How much weight is given to any particular item in the list or any other relevant consideration will depend on the circumstances. Our powers of exemption or declaration RG 167.19 We have powers of exemption or declaration (to omit, vary or modify) that apply to the licensing provisions. Our main discretionary powers are to: (a) exempt a person who provides certain services from the requirement to hold an AFS licence (see s911A(2)(l)); (b) grant exemptions and modifications of the Corporations Act to persons from the requirements of Pt 7.6 (other than Divs 4 and 8) (see s926A); (c) grant exemptions or modifications of the Corporations Act to persons from the requirements of Pt 7.7, including obligations to provide a Financial Services Guide (FSG) and a Statement of Advice (SOA) (see s951B); and (d) grant exemptions or modifications of the Corporations Act to persons from the requirements of Pt 7.8, including obligations on dealing with client money, financial records and statements, and audit (see s992B). RG 167.20 Any exercise of power has to be justified by the net benefits that will arise. We will carefully consider the impact of any relief on retail client protection. RG 167.21 Our powers under s926A, 951B and 992B extend to any definitions, regulations and transitional provisions that apply for the purposes of Pts 7.6, 7.7 and 7.8. Note: For further information, see s761H and the legislative notes to s926A, 951B and 992B. Page 9 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 9 C How to apply for relief Key points To apply for relief, you should submit your application through the ASIC Regulatory Portal and pay the prescribed fee: see RG 167.22–RG 167.23. In your application you will need to explain the benefits of the requested relief and the effects the relief will have on others: see RG 167.24– RG 167.27. Making an application for relief RG 167.22 To apply for relief, you should: (a) submit your application through the ASIC Regulatory Portal; and (b) pay the prescribed fee(s). RG 167.23 You do not need to apply for relief if the required relief is already available under a legislative instrument. What to include in your application RG 167.24 In your application, you need to address why and to what extent relief would save costs or otherwise provide commercial benefits. You must also address the effects of the requested relief on others—in particular, retail clients. This approach reflects that adopted in Regulatory Guide 51 Applications for relief (RG 51). RG 167.25 In your application, you must: (a) specify and quantify any financial and other benefits and costs (including any loss of retail client protection) of the relief as far as you can; (b) if you cannot quantify the benefits and costs, explain why this is so and how the scale of the effects of the relief can be estimated; (c) candidly set out all information that may be relevant to your application, including your commercial objectives and how you will address any loss of retail client protection; and (d) address, to the extent that they are relevant, the factors highlighted in RG 167.12 and RG 167.14. Page 10 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 10 RG 167.26 We exercise our powers based on as much relevant information as can reasonably be obtained. You are better placed than us to get the most relevant information, such as quantification of costs and benefits. It is appropriate that you do so if you choose to seek the benefit of relief. RG 167.27 Generally, if your application does not contain all relevant information, we will refuse it. In some limited circumstances, we may consider delaying a decision on your application until you provide more information. Page 11 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 11 D Securitisation special purpose vehicles Key points Securitisation entities that are established only for the purpose of a specific securitisation transaction are exempt from the licensing provisions in certain circumstances. The securitisation industry RG 167.28 Securitisation is the process by which a portfolio of relatively illiquid assets is packaged into marketable securities (securitisation products). These securitisation products are debt instruments, such as debentures or interests in managed investment schemes, which are then sold into capital markets on either a public or private basis. The benefits payable to investors from a securitisation will depend largely on the return from the underlying assets. Note: ASIC Corporations (Securitisation Special Purpose Vehicles) Instrument 2026/175 at s6 defines ‘securitisation product’; s9 of the Corporations Act defines ‘debenture’ and ‘managed investment scheme’. RG 167.29 The securitisation industry operates almost exclusively in the wholesale market, where the securitisation product is sold to wholesale investors— usually through the on-sale of the securitisation product by a licensed dealer. Securitisation transactions RG 167.30 A securitisation transaction typically involves: (a) an issuer, known as the securitisation entity, that purchases the underlying assets and issues the resulting securitisation products (see RG 167.32–RG 167.35); (b) a number of service providers that perform specific dedicated services in respect of the securitisation transaction, such as a securitisation manager and a servicer of the underlying assets (see RG 167.36– RG 167.38); and (c) an asset sponsor that sells the underlying assets for securitisation to the securitisation entity. RG 167.31 A securitisation transaction may also involve a custodian that holds the underlying assets of a securitisation product on behalf of the securitisation entity. Alternatively, custodial services may be provided by the securitisation manager. Page 12 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 12 Securitisation entities RG 167.32 The securitisation entity purchases the assets for securitisation from the asset sponsor and then issues the resulting securitisation products. Typically, the securitisation entity will be a special purpose entity or special purpose vehicle (SPV). The SPV can be either a special purpose company that issues debentures, or a trustee of a trust that issues interests in a managed investment scheme. RG 167.33 The role of the securitisation entity is to carry on the business of securitisation—namely: (a) issuing the securitisation products; (b) dealing in derivatives and foreign exchange contracts related to the securitisation products; (c) providing custodial or depository services for related financial products (i.e. the underlying assets) on behalf of the securitisation product holders; and/or (d) dealing in financial products as trustee on behalf of the securitisation product holders. RG 167.34 The securitisation entity will often also enter into ancillary arrangements with third parties in order to hedge the risks that are associated with the securitisation transaction. RG 167.35 Securitisation entities generally provide a financial service when they carry on the business of securitisation by issuing, dealing or providing a custodial or depository service. This would ordinarily require the securitisation entity to hold an AFS licence unless otherwise exempted. Securitisation managers RG 167.36 A securitisation manager is appointed under a contractual arrangement with the securitisation entity to manage the securitisation transaction. Typically, the securitisation manager will be an authorised deposit-taking institution (ADI) or a subsidiary of an ADI, and must be a separate legal entity to the asset sponsor. RG 167.37 Broadly, the securitisation manager is responsible for: (a) the provision of: (i) financial product advice to investors through a securitisation information memorandum that details important information about the securitisation transaction; and (ii) financial product and dealing advice to the securitisation entity about how and to whom the securitisation product should be sold; (b) collecting money owing by investors; and Page 13 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 13 (c) keeping records. RG 167.38 Securitisation managers carry on a business of providing a financial service when they offer financial product and/or dealing advice to investors and securitisation entities. Accordingly, securitisation managers must hold an AFS licence unless otherwise exempted: see RG 167.56–RG 167.58. RG 167.39 Figure 1 provides an overview of the securitisation process. Figure 1: Overview of the securitisation process Note: The flowchart shown in this figure is described in RG 167.30–RG 167.38 (accessible version). Our relief for certain securitisation entities RG 167.40 We have provided relief from the requirement to hold an AFS licence to certain entities in the securitisation industry: see ASIC Instrument 2026/175. This relief has been granted to address concerns about the disproportionate burden placed on certain securitisation entities. Which entities does the relief apply to? RG 167.41 The relief applies to a securitisation entity that: (a) issues a securitisation product for the purposes of carrying on a business (the securitisation business) of managing, by way of a securitisation transaction, some or all of the economic risk associated with assets, liabilities or investments (whether the body assumes the risk from another person or creates the risk itself); (b) reasonably believes that it, or if it is the trustee of a trust—the trust, is an insolvency-remote special purpose entity according to criteria of an internationally recognised rating agency that are applicable to the entity’s circumstances; and Securitisation Custodial services Asset sponsor Securitisation products Securitisation entity Sells Underlying assets Buys Responsibilities vary depending on arrangement Contract Investor Securitisation manager Page 14 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 14 (c) raises all, or substantially all, of its funds by issuing securitisation products on terms that the funds raised would be applied in the securitisation business. Note: See s6 of ASIC Instrument 2026/175. Scope of the relief RG 167.42 The relief applies to the provision of the financial services set out in s7(2) of ASIC Instrument 2026/175 by a securitisation entity in the course of carrying on a securitisation business. These financial services are explained in RG 167.43–RG 167.46. Further requirements that must be satisfied for the relief to apply are set out in RG 167.47. Issuing a securitisation product RG 167.43 The relief applies to a securitisation entity issuing a securitisation product where all of the following apply: (a) the securitisation product relates to a securitisation transaction for managing some or all of the economic risk associated with assets held by the securitisation entity; (b) each other securitisation product issued by the securitisation entity relates to that securitisation transaction or another securitisation transaction for managing some or all of the economic risk associated with assets held by the securitisation entity; and (c) the issue is to a person who either holds an AFS licence or is otherwise exempt from holding a licence under ASIC Instrument 2026/175, or ASIC Corporations (Foreign Financial Services Providers) Instrument 2025/798, or any exemption under paragraph 911A(2)(h) or (l) or subsection 926A(2) that includes reference to the exempted person complying with or reasonably believing that they comply with the regulatory requirements of a foreign jurisdiction. Note: Section 761G provides a definition for ‘retail client’. Dealing in derivatives and foreign exchange contracts RG 167.44 The relief applies to a financial service that consists of dealing in derivatives or foreign exchange contracts (or both) where: (a) the service does not involve making a market for derivatives or foreign exchange contracts; Note: Section 766D provides a definition for making a market for a financial product. (b) the dealing is entered into for the purpose of managing a financial risk that arises in the ordinary course of the securitisation business; and (c) the counterparty for the dealing is a wholesale client. Page 15 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 15 Note: Section 761G provides a definition for ‘wholesale client’. Providing custodial or depository services for financial products on behalf of securitisation product holders RG 167.45 The relief applies to a financial service that is providing custodial or depository services in relation to financial products held by the securitisation entity as trustee for the holders of the securitisation products. Dealing in financial products as trustee on behalf of securitisation product holders RG 167.46 The relief applies to a financial service that: (a) is dealing on behalf of the holders of the securitisation products in financial products held by the securitisation entity as trustee for those holders of the securitisation products; and (b) is not dealing by issuing or acquiring derivatives or foreign exchange contracts. Further conditions of the relief RG 167.47 There are two further sets of conditions contained in s8 of ASIC Instrument 2026/175, which must be satisfied before the exemption from the requirement to hold an AFS licence can apply: (a) The first set of conditions applies to the financial services referred to above at RG 167.43, RG 167.44 or RG 167.46. These conditions require that the securitisation entity: (i) provides the financial service in accordance with financial product advice provided by a financial services licensee authorised to provide such advice; and (ii) has entered into a written agreement with the financial services licensee, under which the securitisation entity receives the financial product advice described above and the financial services licensee has not excluded or limited its liability for loss or damage resulting from negligence by that licensee in providing the advice to the securitisation entity. (b) The second set of conditions applies to the financial services referred to above at RG 167.43, RG 167.45 or RG 167.46. These conditions require that the securitisation entity: (i) has not issued any securitisation products to a retail client; and (ii) has taken all reasonable steps to ensure that any securitisation products issued by the securitisation entity are not subsequently acquired by a retail client. Page 16 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 16 Licensee advising the securitisation entity RG 167.48 In providing the advice, the AFS licensee will need to take account of any obligations of the securitisation entity under a trust deed, its contracts and general law. We expect that the advice will be framed so as to ensure the licensee’s conduct in providing advice to the securitisation entity does not adversely affect the efficient, honest and fair provision of financial services by the securitisation entity. RG 167.49 Under the written agreement between the securitisation entity and the AFS licensee authorised to provide advice, the licensee must not exclude liability for its negligence. This means the licensee cannot exclude liability for financial product advice that was provided negligently because the licensee unreasonably assumed facts about the securitisation entity. However, we consider that the written agreement under which the licensee provides the advice may exclude liability for reasonable reliance on information provided by third parties. Securitisation entity receiving the advice from the licensee RG 167.50 Under the written agreement between the securitisation entity and the AFS licensee authorised to provide advice described in RG 167.47(a)(ii) , the securitisation entity does not need to agree to act on the advice provided. However, the securitisation entity must consider whether to act on any advice, having regard to its duties to securitisation product holders. If the securitisation entity does not act on the advice, the relief will not apply. RG 167.51 We anticipate it will be uncommon for a securitisation entity to be bound under its duties to act contrary to the advice of an AFS licensee authorised to provide advice. In the unlikely event the securitisation entity is not able to act on the advice of a licensee, the entity can consider making an application to ASIC for case-by-case relief from the licensing provisions. Intersection with Australian Prudential Regulation Authority’s (APRA) policy on securitisation RG 167.52 Under APRA’s current securitisation policy, a securitisation entity must be financially and operationally independent of its originating ADI. An originating ADI is an ADI that: (a) directly or indirectly originates underlying exposures in the pool of assets to be securitised; (b) is the managing (or sponsoring) ADI for the securitisation; or (c) provides a facility (other than derivatives) to a securitisation. Note: The relevant APRA standard is Prudential Standard APS 120 (APS 120). See paragraph 16 of APS 120 for the obligation for securitisation entities to be financially and operationally independent of their originating ADIs. Page 17 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 17 RG 167.53 After consultation with APRA, we understand that a securitisation entity will not be in breach of APRA’s securitisation policy merely because it has entered into the written agreement described in RG 167.47(a)(ii) with an AFS licensee that is also its securitisation manager. Any ADI subsidiary that does provide financial product advice under the written agreement described in RG 167.47(a)(ii) would of course need to comply with all prudential requirements applied by APRA to the functions it is contracted to undertake. Case-by-case relief for securitisation managers RG 167.54 We do not currently provide relief from the requirement to hold an AFS licence for financial services providers merely because they are acting as a securitisation manager under typical securitisation arrangements. RG 167.55 Securitisation managers typically play a significant role in providing financial product advice to investors, as well as financial product advice and dealing services to the securitisation entity. We consider it is not appropriate to provide securitisation managers with relief from the requirement to hold an AFS licence to provide such financial services because: (a) ASIC’s ability to provide securitisation market users with confidence that securitisation services will be provided efficiently, honestly, fairly and in compliance with the Corporations Act may be compromised by granting this relief; (b) we think that any regulatory detriment on the part of securitisation managers is outweighed by the regulatory benefit arising from market participant confidence; and (c) we think the requirement for securitisation managers to hold an AFS licence is not disproportionately burdensome considering the key role they play in the securitisation process. RG 167.56 Securitisation managers may still apply for relief on a case-by-case basis. We will generally only grant relief in new policy applications when there is a net regulatory benefit, or any regulatory detriment is minimal and is outweighed by the commercial benefit. Note: See RG 51 for more information on when ASIC will grant relief in new policy applications. Page 18 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 18 E Generic financial calculators Key points This section sets out how we regulate generic financial calculators under the Corporations Act. It explains: • how we define a generic financial calculator; • the relief we give to providers of generic financial calculators from the licensing and financial product disclosure requirements in the Corporations Act; and • the requirements that a provider of a generic financial calculator must satisfy when they provide a calculator that benefits from our relief. It also explains that: • our relief does not apply to product-specific calculators and risk profilers because these are not considered generic financial calculators; and • we have different relief arrangements in place for superannuation calculators, and that these are not covered by our relief for generic financial calculators. What is a generic financial calculator? RG 167.57 A generic financial calculator is a facility, device, table or other thing that: (a) is used to make a general numerical calculation or find out the result of a numerical calculation about a financial product; (b) does not advertise or promote one or more specific financial products; and (c) is not a superannuation calculator. Note: For more information about superannuation calculators and the relief we give to providers of superannuation calculators, see RG 167.123–RG 167.127. RG 167.58 Typically, generic financial calculators help the user calculate: (a) the estimated value of savings or investments at a future point in time; and/or (b) the estimated level of savings, investments or life insurance cover required to achieve a particular financial goal. RG 167.59 Generic financial calculators can be a useful and cost-effective educational tool through which consumers can better understand their financial circumstances and goals. Calculators can help consumers engage with their insurance and investment strategies. Page 19 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 19 RG 167.60 Examples of generic financial calculators include the following (but only where they are not about specific financial products): (a) savings calculators; (b) managed investment calculators; and (c) life insurance calculators. RG 167.61 A calculator is not a generic financial calculator merely because its output is a numerical figure. For example, an advice tool that produces a numerical rating of a financial product or comparative ranking of financial products is not a generic financial calculator. Our relief for providers of generic financial calculators RG 167.62 Our overriding objective when regulating generic financial calculators is to facilitate the cost-effective provision of useful and accurate information about financial products and services to consumers through generic financial calculators. RG 167.63 If you provide a generic financial calculator and comply with certain conditions, we give you relief under ASIC Corporations (Generic Calculators) Instrument 2026/41 from: (a) the requirement in s911A(1) to hold an AFS licence covering the provision of that advice; and (b) if you are an AFS licensee or an authorised representative of a licensee— Divs 2, 3 and 4 of Pt 7.7 in relation to that advice. Note: The best interests duty and related obligations under Div 2 of Pt 7.7A do not have effect in relation to a person to whom ASIC Instrument 2026/41 applies: see reg 9.12.03A of the Corporations Regulations 2001 (Corporations Regulations). This is subject to compliance with the conditions set out in the exemption. The need for relief RG 167.64 A generic financial calculator involves financial product advice if it produces recommendations or statements of opinion that are (or could reasonably be regarded as being) intended to influence the user in making a decision about a financial product or class of financial product: see s766B. RG 167.65 Personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where: (a) the provider of the advice has considered one or more of the client’s objectives, financial situation and needs; or (b) a reasonable person might expect the provider of the advice to have considered one or more of those matters (see s766B(3)). Page 20 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 20 RG 167.66 Whether a particular calculator involves financial product advice and whether the financial product advice is likely to be personal advice will depend on the facts of the particular case. Note: For more guidance on the difference between giving factual information, general advice and personal advice, see Regulatory Guide 244 Giving information, general advice and scaled advice (RG 244) and Regulatory Guide 36 Licensing: Financial product advice and dealing (RG 36). RG 167.67 Without the relief in ASIC Instrument 2026/41 the provider of a generic financial calculator that provides financial product advice: (a) will be subject to the AFS licensing, conduct and disclosure obligations in Ch 7; and (b) must comply with the personal advice regime in Div 3 of Pt 7.7 and the best interests duty and related obligations under Div 2 of Pt 7.7A if the generic financial calculator provides personal advice to retail clients. RG 167.68 We understand that the imposition of these regulatory requirements and/or the uncertainty about their application may inhibit the provision of generic financial calculators, particularly because these calculators are often provided free of charge. RG 167.69 The cost of complying with the AFS licensing, conduct and disclosure obligations may be passed on to consumers. In some cases, generic financial calculators may be withdrawn due to the operating costs. This may restrict access to useful information provided by calculators, which would disadvantage consumers. Our conditions of relief RG 167.70 Generic financial calculators have the potential to mislead consumers if they are not designed responsibly. The conditions of our relief seek to ensure that these calculators are designed responsibly and the information provided is useful and accurate. RG 167.71 Table 1 sets out the requirements that apply when you provide a generic financial calculator under our relief in ASIC Instrument 2026/41. Page 21 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 21 Table 1: Overview of the conditions of our relief Issue Condition Location of guidance Promoting a specific financial product The generic financial calculator must not advertise or promote a specific financial product. See RG 167.74– RG 167.81 Assumptions If the generic financial calculator is an electronic facility or device, it must enable the user to change any of the assumptions other than statutory assumptions. The assumptions applied by the generic financial calculator, unless changed by the user, must be reasonable for the purpose of working out the estimate. Statutory assumptions must remain up to date. See RG 167.82– RG 167.89 Disclosure The generic financial calculator must display to the user in the ordinary course of its use or have printed on it:  a clear and prominent statement about the purpose and limitations of the calculator;  a clear and prominent explanation of the impact of any significant limitations of the calculator;  a clear and prominent statement of the assumptions;  where the estimate is of an amount payable or receivable at a future time of two or more years—a clear and prominent statement setting out the present value of the estimate; and  a clear and prominent statement to the effect that the calculator is not intended to be relied on for the purposes of making a decision in relation to a financial product and that the user should consider obtaining advice from an AFS licensee before making any financial decisions. The generic financial calculator must display to the user or have printed on it an explanation of why the assumptions, including any statutory assumptions, are reasonable for the purposes of working out the estimate. A statement or explanation must contain as much detail as a retail client using the generic financial calculator would reasonably expect having regard to the nature of the calculator. See RG 167.90– RG 167.111 Compliance issues You must report non-compliance. You must keep a copy of the generic financial calculator for seven years from when it is made available. If the generic financial calculator is an electronic facility or device, the calculator must not prevent the user from readily printing or electronically storing the estimate. See RG 167.112– RG 167.121 Page 22 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 22 Ensuring the calculator does not advertise or promote a specific financial product RG 167.72 It is a condition of our relief that a generic financial calculator must not advertise or promote a specific financial product. We are concerned that if a generic financial calculator advertises or promotes a specific financial product it increases the risk that consumers will: (a) misunderstand the purpose of the calculator; (b) place too much reliance on it when making financial decisions; and (c) assume the calculator is a complete substitute for personal advice from an AFS licensee. RG 167.73 We consider that your generic financial calculator can refer to a type of financial product without advertising or promoting a specific financial product provided that you and your associates cannot reasonably be expected to issue most of the financial products of that type. For example, a generic financial calculator could refer to a type of financial product such as total and permanent disability insurance, but not the specific financial product such as XYZ Insurance Total and Permanent Disability Cover. RG 167.74 Allowing the calculator to refer to a class of financial product provides necessary context for the consumer around choices and inputs, but the consumer will not associate the results with a specific financial product and assume the calculator can be relied on for the purpose of making a decision about a specific financial product. RG 167.75 We consider that you will not satisfy the condition of relief if the output from your generic financial calculator goes beyond the numerical result of the calculation and a description of the result. Your calculator should not refer to a particular action in the output other than prompting the user to make further inquiries or obtain advice from an AFS licensee. For example, the calculator should not, in light of the relevant numerical result, refer to acquiring or investing an amount in a specific financial product, but it may include a link to a ‘find an adviser’ tool. RG 167.76 Similarly, a generic financial calculator that is directly connected to promotional material for a named financial product is not able to rely on the relief (e.g. if the calculator includes a link to the Product Disclosure Statement (PDS) for the product or a link to an ‘apply now’ button). RG 167.77 We consider that ancillary marketing material (i.e. material that is not specific to the generic financial calculator or the result it generates) can be included on the same page or screen as a generic financial calculator provided it does not relate to a specific financial product. For example, the ancillary marketing material could relate to a class of financial product (see RG 167.75), include the provider’s logo or include a link to the provider’s Page 23 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 23 home page, but should not refer to a specific financial product or include links to other product sites. RG 167.78 A generic financial calculator does not advertise or promote a specific financial product merely because its default assumptions (e.g. fees or rate of return) are the same as the actual features of a specific financial product. You can refer to the specific financial product, but only as part of your disclosure about why the assumptions are reasonable for working out the estimate and only if it is material to that disclosure. RG 167.79 If your calculator refers to a specific financial product in the disclosure about the reasonableness of assumptions, you must take reasonable steps to ensure that it does not advertise or promote the specific financial product, including by ensuring that the disclosure is not more prominent than any other information about the reasonableness of assumptions and less prominent than the calculator itself: see RG 167.97–RG 167.100. Assumptions RG 167.80 Assumptions are an important component of any calculator. Even small changes to assumptions can make large differences to results. RG 167.81 We have not set prescriptive rules about assumptions used in generic calculators (that are not superannuation calculators), except for requirements about the disclosure of future values in today’s dollars: see RG 167.106– RG 167.111. For example, we have not prescribed what assumptions the generic financial calculator should take into account or how the default values of assumptions should be determined. Instead, we have adopted a more flexible approach requiring that: (a) in the case of electronic facilities or devices, the user must be able to alter the default assumptions (except for those that reflect certain statutory fixed factors, such as taxation rates, which can either be fixed or able to be altered by the user); (b) the default assumptions must be reasonable for working out the estimate; and (c) the calculator must include clear statements about, among other things, the limitations of the calculator and why the provider considers the default assumptions to be reasonable. RG 167.82 We consider that assumptions are likely to be reasonable if they are: (a) approved by an actuary or other appropriately qualified professional; (b) consistent with standards for assumptions used by calculators approved by the Australian Government Actuary; (c) consistent with industry standards for assumptions used by calculators; or Page 24 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 24 (d) consistent with similar calculators provided by ASIC. Statutory assumptions RG 167.83 Statutory assumptions are assumptions that reflect a rate or amount fixed by legislation, such as the taxation rates. RG 167.84 Under ASIC Instrument 2026/41: (a) the statutory assumptions can either be fixed or able to be altered by the user; (b) the statutory assumptions, unless changed by the user, must be reasonable for working out the estimate; and (c) the generic financial calculator must include clear and prominent statements about: (i) the limitations of the calculator and the impact of any significant limitations; and (ii) why the provider considers the statutory assumptions are reasonable for working out the estimate. RG 167.85 We consider that there is potential for consumers to be misled if a generic financial calculator includes out-of-date statutory assumptions. The behavioural economics research suggests that default settings are powerful and consumers are reluctant to change default settings. It is important, therefore, that a default statutory assumption is up to date. RG 167.86 We consider that the conditions of our relief require statutory assumptions to be up to date because if they are not up to date they are not ‘reasonable for the purpose of working out the estimate’. Further, if the assumptions are not up to date, then they are misleading. We expect that you will have processes and procedures in place to monitor changes in statutory assumptions and ensure that you comply with your obligation to update them. RG 167.87 Given the potential for consumers to be misled if your statutory assumptions are out of date, we expect that your statutory assumptions will be updated as soon as possible after a change in the assumption becomes substantially certain. You should take steps to limit your risk that the calculator is misleading during the period it takes you to update your calculator where statutory assumptions are out of date. For example, you could include the date at which the statutory assumptions are effective (date stamp) and could include a clear and prominent warning message that the statutory assumptions are out of date. Disclosure RG 167.88 It is a condition of our relief that a generic financial calculator must display ‘clear and prominent’ statements and explanations about prescribed matters. Page 25 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 25 For example, if the calculator has any significant limitations (e.g. by not including the effect of exit fees or taxation payable by the client, or not enabling users to alter default assumptions), these limitations and their impact should be clearly and prominently explained. RG 167.89 It is important that users of generic financial calculators can easily understand that calculators are educational tools and are not intended to be relied on for the purpose of making a decision about a financial product. It is also important that users understand the assumptions and limitations of the calculator. For this reason, it is important that the statements and explanations are accessible and that user engagement with this information is promoted. RG 167.90 A statement or explanation must contain as much detail as a retail client using the generic financial calculator would reasonably expect having regard to the nature of the calculator. RG 167.91 We expect that you will present these statements and explanations in a way that aids comprehension and usability by an ordinary and reasonable consumer of the generic financial calculator. The behavioural economics research suggests that people comprehend information differently depending on the context in which it is provided. Context can be based (among other things) on the environment, the individual, the nature of the products/ services, timing factors and the way the information is presented. RG 167.92 We consider that the approach adopted by the provider should reflect an understanding of how consumers access and engage with the particular generic financial calculator and make decisions (e.g. you should consider user testing to assess how well users understand the information being relayed by your calculator). Disclosure of assumptions RG 167.93 Under our relief, a generic financial calculator must display to the user in the ordinary course of its use, or have printed on it, a clear and prominent statement of the assumptions that have been taken into account. The calculator must also display to the user, or have printed on it, an explanation of why the assumptions, including any statutory assumptions, are reasonable for the purpose of working out the estimate. RG 167.94 The headline assumptions must be clearly and prominently displayed, but the explanation of why the assumptions are reasonable for working out the estimate can be layered (i.e. the disclosure can be accessed on request through a link to the information). RG 167.95 You can refer to a specific financial product as part of your disclosure about why the assumptions are reasonable for working out the estimate, but only if it is material to that disclosure. Page 26 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 26 RG 167.96 If your generic financial calculator refers to a specific financial product in the disclosure about the reasonableness of assumptions, you must take reasonable steps to ensure that it does not advertise or promote the specific financial product. For example, the reference to the specific financial product must not be more prominent than the rest of the disclosure about reasonableness of assumptions. RG 167.97 Your generic financial calculator is also subject to the prohibition against misleading or deceptive conduct in the Corporations Act and the Australian Securities and Investments Commission Act 2001 (ASIC Act). Where past performance information is used to support the reasonableness of assumptions about rates of return, the assumptions may be misleading if there are not reasonable grounds to make the stated assumption. It would not be reasonable for working out the estimate if you used past performance selectively so as to exaggerate the success or disguise the lack of success of a particular investment option. For example, your calculator must not refer to the short- term past performance of a specific financial product to demonstrate the reasonableness of a high default rate of return if those short-term returns are above a return that could reasonably be expected as a long- term average. RG 167.98 Similarly, your assumptions may not be reasonable and may also be misleading if they rely simply on past performance figures without any reference to their relevance to future circumstances. Disclosure of fees and costs RG 167.99 ASIC Instrument 2026/41 does not explicitly require generic financial calculators to include a field relating to fees or costs. For example, some calculators may present a default rate for investment earnings that is net of fees or costs, while others may present fees or costs as a separate factor in the calculation. RG 167.100 Under our relief, the assumptions about fees and costs must be reasonable and the generic financial calculator must include clear and prominent explanations of why the assumptions are reasonable. The calculator must also display to the user a clear and prominent statement about the limitations of the calculator. RG 167.101 Mandating standardised fee disclosure is difficult because generic financial calculators apply to a range of different financial products. We consider that the conditions of our relief will ensure consumers are adequately informed about the impact of fees and costs on long-term outcomes. RG 167.102 If the generic financial calculator does not take into account the effect of certain fees and costs such as exit fees, activity fees or taxes payable by the user, this has to be clearly and prominently explained to the user in the ordinary course of its use, including a clear and prominent explanation of the impact of this limitation. Page 27 REGULATORY GUIDE 167: AFS licensing: Discretionary powers © Australian Securities and Investments Commission July 2022 Page 27 RG 167.103 Further, as noted in RG 167.99, a generic financial calculator is subject to the prohibition against misleading or deceptive conduct in the Corporations Act and the ASIC Act. Disclosure of future values in today’s dollars: Adjusting for inflation RG 167.104 To provide useful information to consumers, the information on future returns or amounts payable must be presented in such a way that it can be properly understood. We consider that consumers’ comprehension of future returns is assisted by giving an indication of what the investment may be at current dollar values at the end of the specified term. RG 167.105 Therefore, under our relief, a generic financial calculator must account for inflation. Where the estimate is of an amount payable or receivable at a future time of two or more years, you must include a clear and prominent statement setting out the present value of the estimate. We recognise, however, that in some limited cases it may not be appropriate to adjust for inflation (e.g. in the case of a generic financial calculator that already adjusts for inflation, such as a mortgage repayment calculator). Default inflation rate RG 167.106 The default inflation rate for discounting the future receipt or payment for generic financial calculators is 2.5% per year. Note: Different requirements apply to providers of superannuation calculators under relief in ASIC Corporations (Superannuation Calculators and Retirement Estimates) Instrument 2022/603: see Section D of RG 276. RG 167.107 The default rate of inflation of 2.5% is based on the midpoint of the Reserve Bank of Australia’s (RBA) target range for inflation. ASIC may amend ASIC Instrument 2026/41 in the future to reflect a change in the RBA’s target range for inflation. If you wish to provide a result in future dollars as well as current dollars, both should be clearly labelled so as to reduce the risk of consumer confusion. RG 167.108 In expressing a value in today’s dollars, we expect that your generic financial calculator will include clear and prominent statements about the limitations of the inflation assumpti