Licensing & Compliance
Corporate Authorised Representative vs. holding your own licence: which is right for your fund?
Should your fund operate as a Corporate Authorised Representative or hold its own Australian Financial Services Licence? A practical comparison of the two pathways, the trade-offs and when to make the switch.
· 3 min read · FundPro
Operating a wholesale fund in Australia requires authorisation under an Australian Financial Services Licence. There are two distinct pathways to that authorisation: apply for your own licence directly with ASIC, or be appointed as a Corporate Authorised Representative (CAR) of an existing licensee. Both are legitimate and well-trodden. The question is which suits your fund at its current stage.
The short version
Most wholesale funds in Australia start as a Corporate Authorised Representative. It is faster, cheaper, lower risk at launch, and provides access to an established compliance framework from day one. Some funds transition to their own licence as they scale, typically once operating scale justifies the additional cost and complexity. There is no rule that a fund must graduate to its own licence.
Pathway 1: Corporate Authorised Representative (CAR)
Under this model, you are appointed as a CAR of an existing AFSL holder. The licensee's authorisations cover your activities, their compliance framework applies to your operations, and their Responsible Managers carry accountability.
Advantages
- Speed to market. CAR onboarding typically takes two to four weeks. An AFSL application takes six to twelve months.
- Lower upfront cost. CAR onboarding is dramatically cheaper than preparing and lodging an AFSL application.
- Established compliance framework. You inherit policies and frameworks built and refined over years.
- Easier focus on the investment business. You spend time on investments and investors, not running a licensed entity.
Trade-offs
- You operate within someone else's framework.
- Your authorisations are derivative - if the licensee's licence is affected, so is yours.
- Some investor types prefer managers with their own licence.
A note on liability
Being a CAR does not reduce your liability for the financial services you provide. CAR agreements typically require the CAR to indemnify the licensee against losses arising from the CAR's activities. Choose the CAR pathway for its operational and cost advantages, not as a liability shield.
Pathway 2: Holding your own licence
Advantages
- Full strategic control over authorisations, policies and operating decisions.
- Direct relationship with ASIC.
- Ability to appoint your own CARs.
- Brand credibility with certain investor types, particularly institutional capital.
Trade-offs
- Significant upfront cost - legal preparation, ASIC fees, RM recruitment and compliance framework build can exceed $100,000.
- Six to twelve months waiting for approval.
- Substantial ongoing cost: Responsible Manager fees, compliance consulting, annual licence audit.
Cost comparison
| Cost item | CAR (low) | CAR (high) | Own licence (low) | Own licence (high) |
|---|---|---|---|---|
| Upfront total | $8,000 | $28,000 | $65,500 | $170,500 |
| Ongoing annual total | $22,000 | $70,000 | $41,000 | $145,000 |
How most funds approach the decision
Most wholesale funds start as a CAR, build track record and scale, and then evaluate whether to apply for their own licence. The practical threshold for moving to an own licence often sits around $100-$200 million in funds under management. Below that, the additional cost and complexity is hard to justify.
Working with FundPro
FundPro is an Australian Financial Services Licensee with broad authorisations covering wholesale funds. We appoint qualifying investment managers as Corporate Authorised Representatives, supported by an established compliance framework and experienced Responsible Managers. Get in touch at info@fundpro.com.au.
This article provides general information only and does not constitute legal, tax or financial advice.
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