Template B5 Financial Resources

WARNING: This template has been provided as a sample only. This template remains the property of Licensee Solutions Pty Ltd. The use of this template is at your own risk. You must carefully consider the requirements and your own circumstances, and then produce your own document to ensure it is customised for your own circumstances.

FINANCIAL RESOURCES

1.Overview

A limited AFS licensee has an obligation to comply with licence conditions (s912A(1)(b)), have adequate financial resources to provide financial services covered by the licence and to carry out supervisory arrangements (s912A(1)(d)) and an adequate risk management system as required by s912A(1)(h). Specifics on financial requirements are included within RG166 Licensing: Financial Requirements.

The Policy addresses <licensee’s name>’s policies on financial resources and processes for financial monitoring.

2.Policy Statement

<licensee’s name> complies with the following financial requirements.

(a)Base level financial requirements.

(b)<Insert any other financial requirements applicable based on types of financial services provided.>

2.1.Base Level Financial Requirements

Base level financial requirements include:

(a)be solvent at all times, i.e. able to pay all your debts as and when they become due and payable;

(b)have total assets that exceed total liabilities and at all times have no reason to suspect that total assets would no longer exceed total liabilities on a current balance sheet. Where licensee has more liabilities than assets, an alternative test can be applied, which is to calculate on the basis of adjusted assets and adjusted liabilities;

(c)meet the cash needs requirement by using either Option 1: reasonable estimate projection plus cash buffer or Option 2: contingency-based projection; and

(d)assess the risk and impact of inadequate financial resources.

2.1.1.Solvency and Net Asset Position

Explain how often will you monitor solvency (i.e. continually) and your net assets position i.e. quarterly.

2.1.2.Cash Needs Requirement

Provide details of which cash needs requirement you will be using (option 1 or option 2) and include the details of the documents that you will maintain to demonstrate that you comply with the cash needs requirement i.e.

  • at least 3-month cash flow projections at all times;
  • assumptions to projected figures;
  • comparison between actual and projected figures; and
  • cash buffer calculation or list of commercial contingencies that could impact on your cash position.
2.1.3.Risk and Impact of Inadequate Financial Resources
  • Include statement on how you have considered the risks your business faces and the impact of failing to meet your liabilities. You can reference that this risk has been dealt with in your risk management policy.

3.Commitment

  • Provide the details of the person in your organisation who is responsible for monitoring financial resources and ensuring that you have adequate financial resources.
  • How often will this policy and the adequacy of financial resources be reviewed.

4.Reference

  • RG2 AFS Licensing Kit: Part 2—Preparing your AFS licence or variation application
  • RG 166 Licensing: Financial requirements

financial monitoring procedure

1.Purpose

The purpose of this procedure is to ensure that licensee meets its financial requirements on an ongoing basis.

2.Resources required

(a)Cash flow projections and actual cash flows;

(b)Assumptions to projected figures;

(c)Balance sheet; and

(d)Documentation in relation to addressing ASIC’s cash needs requirement.

3.Procedure

Document your procedures on how financial requirements will be monitored. You may wish to consider the following:

  • How frequently will you review cash flow projections?
  • How frequently will you compare actual figures against cash flow projections?
  • Who will be responsible for updating cash flow projections and prepares Statement of Financial Position?
  • Is there an alternate person who could assist in the event of absences?
  • How are financial requirements reported on?
  • Are there forms or checklists to assist with this process?