AFS Licensee Obligations_ ASIC Audit Preparation Guide

In Australia’s highly regulated financial advice sector, meeting AFS licensee obligations isn’t merely about passing an ASIC audit — it’s about safeguarding your firm’s integrity, credibility, and client trust. This comprehensive guide explores the core compliance requirements under the Corporations Act 2001 (s912A) and offers actionable insights to help Australian Financial Services (AFS) licensees maintain continuous readiness for ASIC reviews and audits.

The Australian Securities and Investments Commission (ASIC) conducts regular surveillance programs, thematic reviews, and reactive audits to ensure that licensees act efficiently, honestly, and fairly. While many firms view these audits as compliance hurdles, the most successful licensees embed compliance into their daily operations — turning governance into a driver of business resilience and professional excellence.

This guide breaks down the key AFS licensee obligations, including maintaining adequate financial and human resources, ensuring organisational competence, managing conflicts of interest, implementing effective risk management systems, and maintaining accurate records. You’ll also learn what ASIC commonly reviews during audits — such as advice documentation, fee disclosure statements, client best interest duty compliance, and CPD records.

Through practical strategies and expert recommendations, the article outlines how to prepare effectively for an ASIC audit. From conducting internal file reviews using a paraplanner audit checklist to engaging independent compliance reviewers, every step helps build a culture of accountability and proactive governance. The guide further explores the benefits of outsourcing paraplanning and compliance support, which enables firms to maintain high-quality documentation, meet reporting timelines, and ensure their advice aligns with current ASIC expectations.

Common pitfalls such as outdated disclosure templates, poor record-keeping, and missed breach reports are also addressed, along with best practices for ongoing AFSL compliance — including maintaining a compliance calendar, leveraging technology for breach notifications, and fostering open communication across teams.

With ASIC’s focus areas evolving — from advice quality to the responsible use of AI tools — staying audit-ready is more important than ever. By following these principles, AFS licensees can not only meet their regulatory obligations but also enhance operational transparency and strengthen client confidence.

Ultimately, ASIC audits should not be feared but embraced as opportunities to refine systems, reinforce ethical standards, and demonstrate professional diligence. With the right preparation and guidance from experienced compliance and paraplanning partners such as Brokers Support Global, maintaining AFSL compliance becomes an integral part of delivering consistent, high-quality financial advice.

1. Aagam Shah October 29, 2025
AFS Licensee Obligations: ASIC Audit Preparation
Guide
brokerssupport.com.au/blog/afs-licensee-obligations-asic-audit-preparation/
Preparing for ASIC Audits: Guide to AFS Licensee Obligations
Preparing for ASIC Audits: Guide to AFS Licensee Obligations
When you hold an Australian Financial Services Licence (AFSL), compliance isn’t just an
administrative requirement, it’s a professional obligation that reflects your firm’s
credibility and integrity. Whether you’re an established licensee or a new entrant,
understanding your AFS licensee obligations is essential to maintaining trust, meeting
regulatory expectations, and passing ASIC audits with confidence.
ASIC (Australian Securities and Investments Commission) regularly conducts reviews
and inspections to ensure that licensees uphold the standards set under the
Corporations Act 2001. While many businesses treat audits as an occasional compliance
event, the reality is that maintaining year-round readiness is far more effective and less
stressful.
Understanding ASIC Audits
An ASIC audit is a formal review of how well a licensee adheres to their AFSL
compliance framework. These audits are designed to ensure that advice is delivered
ethically, that client interests come first, and that internal controls function as intended.
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2. ASIC typically conducts three types of reviews:
Routine or periodic audits – scheduled to assess ongoing compliance standards.
Thematic reviews – focusing on specific risk areas such as advice quality or fee
disclosure.
Reactive audits – triggered by complaints, breach reports, or market intelligence.
The aim isn’t to penalize businesses but to confirm they have effective systems for
managing risks, reporting breaches, and demonstrating competence in all licensed
activities.
Core AFS Licensee Obligations
Every licensee must operate in accordance with the conditions outlined in section 912A
of the Corporations Act 2001, commonly referred to as the s912a corporations act
obligations. These form the backbone of what ASIC expects from every AFS license
holder.
Here’s a breakdown of the main AFS licence obligations:
1. Act efficiently, honestly, and fairly
This principle underpins all financial advice activities. Licensees must demonstrate
that client interests come before commercial gain and that advice is supported by
evidence and rationale.
2. Maintain adequate resources
ASIC requires that licensees have sufficient financial, human, and technological
resources to deliver services responsibly.
3. Ensure organisational competence
Responsible Managers must have the appropriate qualifications, experience, and
knowledge to supervise representatives and ensure compliant advice delivery.
4. Implement risk management and compliance systems
A licensee must have structured processes to identify, monitor, and manage
operational and compliance risks.
5. Supervise and train representatives
All representatives must meet education and competency requirements under RG
146 and complete ongoing CPD (Continuing Professional Development).
6. Manage conflicts of interest
Proper conflict management frameworks ensure that recommendations align with
clients’ best interests rather than internal incentives.
7. Maintain adequate records
ASIC places heavy emphasis on record keeping. Every piece of client advice,
disclosure, and communication should be properly documented and accessible.
8. Meet financial and reporting obligations
This includes timely breach reporting, financial audits, and notifying ASIC of
material changes within the business structure.
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3. Failing to meet any of these AFSL compliance requirements can lead to sanctions,
licence suspension, or reputational damage.
Common Areas ASIC Reviews During Audits
ASIC’s reviews are typically evidence-driven. They assess both the quality of advice
provided and the governance systems supporting it. During an audit, the following areas
often come under scrutiny:
Advice documentation: Are SOAs (Statements of Advice) and ROAs (Records of
Advice) complete and compliant?
Fee arrangements: Are ongoing fee consent and disclosure statements properly
managed?
Client best interest duty: Does each recommendation demonstrate compliance
with the Best Interests Duty under s961B?
Record-keeping practices: Are client files detailed enough to show the reasoning
behind each recommendation?
Training records: Are all representatives maintaining their CPD hours and
knowledge standards?
Breach and complaint registers: Are these updated, and are incidents reported
within 30 days?
As explored in K&L Gates’ article on AFSL holders and AI, ASIC warns that some
licensees are adopting AI tools faster than they are updating their risk and
compliance frameworks, which can create significant governance and compliance
risks.
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4. Preparing for an ASIC Audit
Preparation begins long before ASIC arrives. The best approach is to maintain
continuous readiness, an internal culture where compliance is a day-to-day responsibility
rather than an occasional obligation.
Here’s how you can prepare effectively:
1. Review your internal compliance framework
Regularly assess your policies and procedures against ASIC’s latest guidance
notes and RG updates.
2. Conduct periodic file reviews
Use a structured paraplanner audit checklist to review SOAs, ROAs, and advice
templates. This helps identify missing disclosures, weak justifications, or outdated
information before an external review exposes them.
3. Train and upskill your team
Ensure all advisers and paraplanners understand the key AFS licensee obligations
and know how to demonstrate them in their client work.
4. Test your breach and complaint processes
Simulate scenarios to ensure your team knows what constitutes a breach and how
to report it correctly within the 30-day timeframe.
5. Engage independent reviewers
Consider external or outsourced paraplanning support to review advice files
objectively. This not only improves quality but ensures ongoing adherence to AFSL
compliance requirements.
6. Update Responsible Manager records
ASIC may request proof of competence for Responsible Managers, so keeping
CVs, qualification certificates, and role descriptions updated is critical.
According to the Mondaq article on ASIC’s 2024-25 industry funding model, licensees
should “build this cost into cash-flow projections” because the levy is calculated on all
authorisations on the AFSL, even those not utilised during the year. 
What to Expect During the Audit
When ASIC schedules an audit, the process usually unfolds in stages:
1. Notification and scope – You’ll receive formal notice detailing the purpose, focus
areas, and documents required.
2. Data and document submission – ASIC will request client files, compliance
manuals, training records, and breach logs.
3. Interviews and follow-ups – Key staff, such as Responsible Managers or
compliance officers, may be interviewed.
4. Findings and feedback – ASIC provides a report outlining areas of strength and
those needing remediation.
5. Remediation phase – Licensees must address deficiencies and confirm
improvements within a set timeframe.
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5. As noted by KPMG in its review of Australian Securities and Investments Commission’s
30 June 2025 surveillance program, ASIC continues to focus on “areas requiring
significant judgement including revenue recognition, asset valuation and provisions”.
Being transparent and cooperative during the process can make a significant difference
in the outcome.
Common Mistakes That Lead to Findings
Even well-prepared licensees can make errors that trigger ASIC findings. Some
recurring issues include:
Outdated disclosure templates or FSGs.
Poor record keeping of advice justifications.
Failure to report breaches promptly.
Insufficient supervision of authorised representatives.
Missing or incomplete training and CPD records.
Weak conflict of interest management.
Identifying and rectifying these early through routine reviews can prevent more serious
consequences later.
Best Practices for Ongoing AFSL Compliance
Remaining audit-ready year-round requires a proactive mindset. Here are a few habits
that support strong compliance:
Maintain a compliance calendar with regular review dates.
Conduct quarterly internal file audits using the paraplanner audit checklist to
ensure documentation standards remain consistent.
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6. Review your risk management framework annually.
Use technology for document tracking and breach notifications.
Partner with experienced compliance consultants or paraplanning teams to handle
complex documentation.
Encourage open communication, every staff member should understand their role
in maintaining compliance.
Building these habits ensures that when ASIC does review your operations, compliance
isn’t an afterthought,  it’ s already embedded in how you do business.
The Role of External and Outsourced Support
Many AFS licensees and advisory firms find that outsourcing parts of their compliance or
paraplanning work significantly improves efficiency and quality. Outsourced
professionals can provide independent reviews, help maintain consistent documentation,
and ensure that your advice files align with ASIC’s current standards.
This collaboration allows advisers and licensees to focus on client relationships and
strategic growth, while specialists handle compliance-heavy documentation and
technical accuracy. For many, this is a cost-effective way to meet AFSL compliance
requirements while improving audit outcomes.
Conclusion
Meeting AFS licensee obligations isn’t just about passing an ASIC audit, it’s about
upholding the ethical and professional standards that define Australia’s financial advice
industry. By embedding compliance into everyday processes, staying informed about
regulatory updates, and using tools like a paraplanner audit checklist, licensees can
build stronger, more resilient businesses.
Audits shouldn’t be viewed with apprehension but as opportunities to strengthen
systems, refine processes, and demonstrate professional accountability. With the right
preparation, and the right support from partners such as Brokers Support Global, staying
compliant becomes not just manageable, but an integral part of delivering quality
financial advice.
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