Your Own AFSL vs Authorised Representative

Every emerging investment manager preparing to launch a wholesale fund in Australia hits the same fork in the road: to operate lawfully you generally need to be licensed — and there are really only two ways to get there. You can hold your own Australian Financial Services Licence (AFSL), or you can operate under an existing one. The path you choose shapes how quickly you reach market, what it costs, how much control you keep, and where your compliance obligations sit.

This guide breaks down both options — and the components that make up operating under an existing AFSL — so you can work out which fits your stage, strategy and appetite for regulatory responsibility.

First — do you actually need to be licensed?

Start with ASIC's own guidance. ASIC's position is that to run a financial services business you generally need to be authorised under an AFS licence, and that dealing in a financial product — which expressly includes issuing interests in a managed investment scheme — is a financial service (ASIC: Do you need an AFS licence?). So operating a scheme, or issuing interests in it to investors, generally requires an AFSL — unless an exemption applies, or you provide the services as an authorised representative of a licensee.

Whether the scheme itself must be registered is a separate question. ASIC's guidance is that a scheme generally must be registered if it has more than 20 members or is promoted by someone in the business of promoting schemes, and that schemes in which all interests are issued to wholesale clients are generally exempt from registration (ASIC: How to register a managed investment scheme; section 601ED of the Corporations Act). Most wholesale funds therefore operate as unregistered schemes.

Here's the point emerging managers most often miss: being exempt from registration doesn't remove the licensing requirement. ASIC's guidance is that operators and trustees of unregistered schemes must generally still hold an AFS licence to issue, vary or dispose of interests in the scheme (ASIC: AFS licensing requirement for trustees of unregistered managed investment schemes (INFO 251)).

The small-scale "2/20" concept managers often ask about — broadly, up to $2 million raised from no more than 20 investors in a rolling 12-month period — sits across these separate disclosure, registration and licensing rules rather than being a single clean carve-out from licensing. It generally suits testing a strategy, not running a commercial fund, and shouldn't be relied on as a substitute for a licence. Other narrow carve-outs exist too (such as intermediary authorisation, services only to related bodies corporate, and certain offshore-regulated arrangements), and each is fact-specific — take your own advice on whether any of them fits your situation.

If no exemption fits — the usual position for anyone running a genuine commercial fund — the choice comes down to two options: hold your own AFSL, or operate under an existing one.

Option 1 — Apply for your own AFSL (self-licence)

Holding your own licence gives you the most autonomy: you operate under your own brand, control your authorisations, and aren't dependent on another licensee's scope or supervision. For managers building for scale, it's the natural long-term destination.

It also carries the most upfront work. ASIC assesses your organisational competence largely through your responsible managers — the people whose qualifications and experience demonstrate you can provide the financial services you're applying for. Fund trustees, responsible entities and custodial/depository providers also face additional capital-adequacy requirements (net tangible assets, cash-flow projections and the like). You'll need documented, implemented compliance and risk-management frameworks, and the application itself takes time to prepare and for ASIC to assess — generally a matter of months, and timeframes vary. ASIC application fees apply and are updated periodically, so budget for those plus the professional costs of getting the application right.

Best suited to: managers who want full control, are at (or building toward) a scale that justifies the cost, and can field the responsible-manager experience ASIC expects.

Trade-off: generally the longest path to market, the highest upfront cost, and ongoing obligations that rest squarely with you.

Option 2 — Operate under an existing AFSL

Rather than holding the licence yourself, you can come under an existing AFSL and use its infrastructure — reaching market under a licence and structure that already exist while you focus on running the investment strategy. In the fund context this typically brings two components together.

Component 1 — Authorisation to provide the financial services (corporate authorised representative)

A corporate authorised representative (CAR) is a company authorised by an existing AFSL holder to provide specified financial services on that licensee's behalf — the mechanism through which you're authorised under the licence to run the strategy, deal and advise. It's often the fastest practical route to market, because appointment can take weeks rather than the months a fresh AFSL application can run to.

Under a CAR arrangement the licensee takes on supervisory responsibility for your conduct, so you operate within the scope of the authorisations granted, receive training and oversight, and work inside the licensee's compliance framework. The standards aren't lower — the responsibility is simply shared differently. One important limit: a corporate authorised representative cannot operate a managed investment scheme — operating the scheme sits with the licensee, whether as responsible entity of a registered scheme or as trustee and issuer of an unregistered one. The CAR's role is to provide the financial services within the licensee's authorisations, such as dealing and advising in relation to the scheme.

Component 2 — The licensee as trustee and issuer (plus operational infrastructure)

Alongside the authorisation, the existing licensee acts as the trustee and issuer of the scheme and carries the surrounding compliance and operational framework:

• For a wholesale, unregistered scheme, a licensed trustee holds legal title to the scheme's assets on behalf of unitholders, issues the interests in the scheme, and is responsible for its compliance and governance.
• For a registered scheme, a responsible entity (RE) — an Australian public company holding an AFSL with the appropriate retail authorisations — operates the scheme, maintains a compliance plan lodged with ASIC, and meets ongoing reporting and audit obligations.

Whether a scheme must be registered turns mainly on its number of members and whether it's promoted by someone in the business of promoting schemes — not on the wholesale/retail line alone. In practice, though, wholesale funds are generally run as unregistered schemes (with a trustee) and retail funds as registered schemes (with an RE).

How the two components combine

For a wholesale fund, these components work together: you run the strategy as a corporate authorised representative under the licence, while the licensee is the trustee and issuer and carries the compliance and operational infrastructure. That lets you reach market under an established licence and structure — without holding your own AFSL or building the trustee, compliance and operational machinery yourself.

Best suited to: managers who want speed to market and a lighter upfront burden, and who are comfortable operating within an established licensed framework rather than their own.

Trade-off: you operate within the licensee's scope and structure, rely on the platform's responsiveness and quality, and pay ongoing fees for the arrangement.

Own AFSL vs authorised representative: how they compare

The factors that should drive your decision

• Speed to market — if you need to be operating in weeks, operating under an existing AFSL will generally beat a fresh AFSL application by months.
• Cost and stage — early on, the economics usually favour operating under an existing licence; your own AFSL makes more sense as assets and revenue grow.
• Control — how much you want to own your authorisations, brand and structure versus operate within an established framework.
• Trajectory — many managers start under an existing licence and move to their own AFSL as they scale. Choosing a path that can evolve matters as much as the path itself.
• Asset class and complexity — the authorisations, structure and responsible-manager experience you need differ across equities, private credit, property, venture capital and other assets.
• Wholesale vs retail ambitions — a wholesale-only, unregistered structure is generally far lighter to run than a registered retail scheme, which pulls in an RE, a compliance plan and additional obligations.
• In-house capability — whether you have (or want to build) the compliance and operations function internally, or would rather it sit with the licensed platform.

Where an integrated platform fits

Operating under an existing AFSL is rarely a single moving part — it brings together authorisation, a trustee and issuer, compliance reporting and day-to-day operational governance. Stitching those across separate providers is where time and risk leak, which is why integrated platforms exist.

Operating under an existing AFSL is the model Provenance is built for. It's the platform of Providence Equity Holdings Pty Ltd, the licensed entity. Under the model, Providence Equity Holdings acts as the trustee and issuer of the wholesale scheme — holding legal title to the scheme's assets on behalf of unitholders, issuing the interests, and bearing the trustee and issuer responsibilities — while the underlying manager is onboarded as an authorised representative under the licence to run the investment strategy. Compliance reporting and operational governance sit on the same platform. It's infrastructure for managers — not financial product advice to investors, and not a custodial service.

These services are available now; the Provenance platform is in development.

Frequently asked questions

Related reading: How to set up a wholesale fund in Australia — the full process. What does it cost to set up a wholesale fund? — the two routes compared, with real numbers. And do corporate advisors need an AFSL? — when advice and arranging trigger a licensing requirement.

Sources & further reading (ASIC)

This page draws on guidance published by ASIC. For the authoritative position, see:

Disclaimer