How to Vary a Restrictive AFSL Condition

Introduction

An Australian Financial Services Licence (AFSL) may authorise a financial service or product while separately restricting how, to whom or under what circumstances the licensee operates. These restrictions can include key person conditions and other requirements imposed by the Australian Securities and Investments Commission (ASIC), and they remain binding under Section 912A(1)(b) of the Corporations Act 2001 (Cth) (‘Corporations Act‘) unless ASIC formally varies or revokes them.

AFSL holders seeking to change a restriction must apply under Section 914A and show why the original rationale no longer supports the existing condition. The discussion covers what the application must establish, supporting evidence, the distinction between ASIC-imposed and prescribed conditions, and ASIC’s assessment process under Section 914B.

Interactive Tool: See If Your AFSL Condition Can Be Varied

Can a Restrictive AFSL Condition Be Varied?

What is a Restrictive AFSL Condition?

Sections 914A(6)–(7) of the Corporations Act require the licence to specify the financial services or class of financial services the licensee is authorised to provide, including by reference to particular financial products or product classes. ASIC may also impose additional conditions under Section 914A(1)(a).

A restrictive AFSL condition is not a defined term in the Corporations Act. It describes a condition that limits how, to whom or under what circumstances an AFSL holder may operate.

ASIC’s Pro Forma (PF) 209, which sets out ASIC’s standard licence conditions rather than additional statutory requirements, shows that an authorisation condition may be tailored by:

• financial services;
• financial products;
• client types;
• capacity; or
• method of service.

Separate conditions may include a key person requirement or tailored supervision, reporting, governance or operational controls.

ASIC-Imposed Conditions Versus Prescribed Conditions

Under Section 914A(1)(b) of the Corporations Act, ASIC may vary or revoke conditions imposed on an AFSL. An AFSL holder may apply for ASIC to take that action under Section 914A(2)(b) of the Corporations Act.

However, Section 914A(8) of the Corporations Act creates a separate limitation. ASIC cannot vary or revoke conditions prescribed by regulations, including conditions prescribed by Regulation 7.6.04(1) of the Corporations Regulations 2001 (Cth) (‘Corporations Regulations‘). As a result, the source of the restriction must be identified before an AFSL holder prepares a variation application.

When Should You Consider Varying a Restrictive AFSL Condition

Changed Business Circumstances

A restrictive AFSL condition may become less appropriate when the circumstances supporting it have changed. This may occur where the business develops:

• additional responsible managers;
• stronger compliance systems;
• clearer reporting lines;
• more staff; or
• established governance arrangements.

The application should explain why those changes support varying the restriction. ASIC’s Regulatory Guide (RG 1.9(b)) states that, when assessing a variation to an ‘other condition’, ASIC considers whether changing the condition is appropriate.

As a practical matter, commercial inconvenience alone is unlikely to address that question; the stronger case is to explain how the licensee’s present resources, competence, and controls address the concern underlying the condition.

Example of Varying or Removing a Key Person Condition

Consider a general licensee whose AFSL contains a key person condition naming Responsible Manager A. When the condition was imposed, the business may have relied heavily on that person’s experience to demonstrate organisational competence.

The licensee later develops overlapping experience among several responsible managers, documented succession arrangements and stronger compliance systems. It may then apply under Section 914A(2)(b) of the Corporations Act to vary or remove the condition.

Responsible Manager A’s departure does not remove the restriction automatically. The existing condition remains binding under Section 912A(1)(b) of the Corporations Act unless ASIC formally varies or revokes it under Section 914A(1)(b).

What Should the Supporting Case Address

The Original Rationale

The application should identify the exact AFSL condition the licensee wants ASIC to vary or revoke. It should also explain why ASIC imposed that condition when the AFSL was granted or later changed.

The relevant rationale may appear in the original licensing material, ASIC correspondence, responsible manager information or the notice imposing the condition. A clear explanation of the original concern helps ASIC assess whether that concern still justifies the existing restriction.

Changed Circumstances

The application should identify the material facts that have changed since ASIC imposed the condition. Those changes must be connected to the reason the restriction was originally considered necessary.

Relevant changes may include:

• additional responsible managers;
• overlapping experience;
• clearer reporting lines;
• documented succession arrangements; and
• established compliance processes.

The application should explain how those developments affect the specific concern addressed by the condition, rather than relying only on business growth or commercial inconvenience.

Remaining Regulatory Issues & Controls

The licensee should state whether the issue that led to the condition still exists. If some risk remains, the application should explain how the licensee’s existing arrangements address it without relying on the condition in its current form.

The explanation should focus on controls connected to the restriction, including:

• responsible manager coverage;
• supervision;
• reporting lines;
• documented responsibilities; and
• compliance monitoring.

Assertions should be supported by evidence that the arrangements are established and operating, rather than only proposed for the future.

Complete Removal Versus Narrower Wording

The application should state whether the licensee seeks complete revocation or a narrower variation of the AFSL condition. The preferred outcome should reflect the remaining regulatory issue and the controls already operating.

A narrower condition may be more appropriate where the original concern still exists but the current restriction is broader than necessary. The proposed wording should be precise and address the actual condition, rather than asking ASIC to make the AFSL “less restrictive” in general terms.

What Evidence Should Support the Variation

Key Person & Organisational Competence Evidence

Section 912A(1)(e) of the Corporations Act requires an AFSL holder to maintain the competence to provide the financial services covered by its licence. Separately, ASIC INFO 294 states that a key person variation will require information about the competence of the licensee’s responsible manager(s).

Where removal is sought because the named key person is no longer a responsible manager, ASIC also states that the application will need to explain why the licensee is no longer dependent on a single responsible manager.

Relevant documents may include:

• responsible manager experience and competence records;
• organisational charts and reporting lines;
• documented responsibilities and delegation arrangements; and
• succession planning showing continuity if a key person leaves.

The evidence should connect these arrangements to the original reason for the restriction and show how the AFSL holder now maintains the required competence.

Where the variation relies on several responsible managers, our AFSL Table of Organisational Competence Template (Formerly B1.3) can help show how they collectively meet competence requirements.

Operational & Governance Evidence

Evidence for an operational or governance condition should address the control that the restriction was intended to support. Relevant material may include:

• policies and procedures;
• compliance monitoring records;
• board or committee records;
• staffing information; and
• assurance reports.

The documents should show that the relevant arrangements are established and operating, rather than only proposed for the future. A general collection of compliance material may carry less weight if it does not explain how the AFSL holder manages the specific issue addressed by the condition.

Our Free Compliance Guide on Core Obligations for AFS Licensees can help with reviewing core licence obligations and related compliance records.

How to Apply to Vary a Restrictive AFSL Condition

Reviewing the Condition & Licensing History

Start by obtaining the current AFSL and reviewing the exact wording of the restrictive condition. Confirm whether it appears within an authorisation condition or as a separate condition, and check any definitions or cross-references affecting its scope.

The licensing history may include:

• the original application;
• ASIC correspondence;
• responsible manager material;
• earlier variation applications; and
• any notice explaining the condition.

This review should confirm whether the condition is ASIC-imposed and may be varied under Section 914A, or prescribed by regulations and cannot be varied under Section 914A(8).

Deciding the Exact Variation Sought

The application should identify the precise outcome sought. The licensee may ask ASIC to:

• revoke the condition entirely;
• narrow its scope;
• replace a named person; or
• substitute the existing wording with another condition.

A complete revocation may be appropriate where the regulatory concern no longer exists, while narrower wording may be more suitable where some concern remains but the existing restriction is broader than necessary. The application should state the proposed wording rather than asking generally for the AFSL to become less restrictive.

Preparing the Supporting Case

The supporting case should connect the original reason for the restriction with the changes that have occurred since it was imposed. Evidence may include:

• responsible manager competence records;
• organisational charts;
• reporting lines;
• documented responsibilities;
• succession arrangements;
• compliance monitoring records; and
• evidence that relevant controls operate.

The licensee should also explain how it will continue meeting its obligations after the proposed variation. Where relevant, this includes organisational competence under Section 912A(1)(e) of the Corporations Act. The AFSL Compliance Checklist (Free) can assist with reviewing compliance records and controls before the application is prepared.

Lodging via the Regulatory Portal

A licensee-initiated application to vary or revoke an ASIC-imposed condition is made under Section 914A(2)(b) of the Corporations Act. ASIC’s INFO 294 states that AFSL variation applications are submitted online through the ASIC Regulatory Portal.

The application should identify whether it concerns:

• financial service or product authorisation conditions;
• other conditions, such as a key person condition; or
• both.

Since 16 June 2025, ASIC has processed these applications through the ASIC Regulatory Portal rather than the former FS03 and eLicensing process.

Section 914B and Fit & Proper Considerations

ASIC may refuse the application if the fit and proper person requirement in Section 913BA of the Corporations Act is not satisfied in relation to the applicant and the AFSL as proposed to be varied. Section 914B(2) of the Corporations Act gives ASIC this power when assessing an application under Section 914A(2)(b) of the Corporations Act.

The assessment may extend beyond the wording of the condition. The licensee should review relevant fit and proper matters before lodging the application, including information concerning people considered under Section 913BA of the Corporations Act.

Information & Audit Requests

Under Section 914B(3)(a) of the Corporations Act, ASIC may give the applicant a written notice requiring prescribed-form information about matters ASIC must have regard to when deciding whether the Section 913BA fit and proper person requirement is satisfied. Under Section 914B(3)(b), ASIC may also request an audit report on those matters, prepared by a suitably qualified person specified in the notice.

If ASIC proposes to grant the application, Section 914B(3)(c) of the Corporations Act allows it to request a statement identifying any material changes to information provided with the application or confirming that no material changes have occurred. Section 914B(5) allows ASIC to withdraw the request or extend the specified time.

If the requested information, audit report or statement is not lodged in the prescribed form within the specified time, Section 914B(6) provides that the application is taken to have been withdrawn.

If ASIC proposes to refuse the application instead, Section 914B(9) requires ASIC to first give the applicant an opportunity for a private hearing and to make submissions.

Common Mistakes When Varying a Restrictive AFSL Condition

Focusing on the Wording Instead of the Original Rationale

A variation application should do more than identify wording the AFSL holder wants removed. It should explain why ASIC imposed the condition and what has changed since that decision.

The application should connect:

• the original regulatory concern;
• the condition imposed to address it;
• the changes affecting that concern; and
• the reason the proposed variation is now appropriate.

A request based mainly on commercial inconvenience may not address the issue ASIC must assess. The focus should remain on whether the condition is still required in its existing form.

Providing Generic or Future-Focused Evidence

A broad collection of compliance documents may not establish why a restrictive AFSL condition should change. The evidence should relate directly to the concern that led ASIC to impose the condition.

Documents showing established arrangements may carry greater weight than controls that exist only as proposals. Relevant material may include:

• responsible manager records;
• reporting lines;
• documented responsibilities;
• succession arrangements;
• compliance monitoring records; and
• evidence that governance or operational controls are functioning.

The application should show what the AFSL holder does now, rather than relying mainly on measures it intends to introduce after ASIC varies the condition.

Assuming Business Growth Alone Justifies the Variation

Business growth does not, by itself, establish that an AFSL condition is no longer necessary. A larger business may still have the same competence, supervision, or governance concern that supported the original restriction.

The application should explain how the change in size or resources affects the specific regulatory issue. Relevant evidence may include:

• additional responsible managers with overlapping experience;
• clearer reporting and delegation arrangements;
• established compliance systems; and
• succession arrangements supporting continuity.

The connection between growth and reduced reliance on the restriction must be explained rather than assumed.

Assuming the Condition Stops Applying Once You Apply

Lodging an application does not suspend the existing AFSL condition. The restriction remains binding under Section 912A(1)(b) of the Corporations Act while ASIC considers the application, and the AFSL holder should continue operating within it unless and until ASIC formally varies or revokes it under Section 914A(1)(b) of the Corporations Act. An application alone does not authorise activities that the existing condition prevents.

Conclusion

Varying a restrictive AFSL condition requires identifying its legal source, explaining the changed circumstances and showing why the existing restriction is no longer necessary or should be narrowed. The licensee must support its application with targeted evidence and continue complying with the existing condition.

For assistance with the next step, contact Click Legal’s AFSL application lawyers in NSW for varying restrictive licence conditions to assess the condition, prepare the supporting case and help present the application clearly to ASIC.

Frequently Asked Questions