Eternity Law International — News — Buying an existing AFS license vs obtaining a new one

Buying an existing AFS license vs obtaining a new one

Published:
September 15, 2022

It is commonly considered that by buying an existing AFS license, a businessperson can pretty easily and quickly rush into the sector of finances. Whilst this concept does have some merit, there are many risks and obligations many prospective purchasers may not be aware of. As well, the legit and regulative obligations for applying for a new AFS license are quite difficult and require a good eye for detail. The following is an overview of the issues related to buying an AFS license and getting a new one.

AFS license authorizations

  • Existing AFS: The purchaser of a license will need to consider whether the AFS license for sale gives the authorization to carry out the intended services. If the license variation is necessary, then this takes extra time and is costlier.
  • New AFS: This is not an issue as the license application will cover all necessary authorizations.

Due diligence or risk management

  • Existing AFS: DueD should be carried out at the stage of the acquisition of any company. The extent of the DueD inquiries will be framed by the transaction of the license.
  • New AFS: No such requirements as the applicant will be a newly registered company.

Responsible manager (RM)

  • Existing AFS: The RM terms need to be assessed as part of the DueD inquiries of the purchaser. If the business necessitates the provision of services of an external RM, then this will produce some extra costs.
  • New AFS: The compliance employees will be appointed before the application being submitted.

Cost considerations

  • Existing AFS: Generally, the cost to buy an AFS license differs subject to the scope of authorizations and other factors. The buying price for “ready-made” licenses normally ranges from 25,000 USD to 250,000 USD. It should be noted that the expenses for any DueD must also be factored into the total price for the deal.
  • New AFS: The overall price to properly prepare and send an application for a license will vary between 35,000 USD to 50,000 USD subject to the scope of the offerings of the business and the issues raised by the regulator while the application procedure is in progress.

Timeframe considerations

  • Existing AFS: The time taken to purchase a ready license will greatly depend on the extent of the DueD inquiries. A common acquisition, as a rule, takes 3 to 4 months. However, if the license needs to be expanded, the process can prolong for a further 2 to 3 months. In addition, extra time will be necessary to appoint an adequate number of employees, address any issues raised by the regulator, and broaden the AFS license scope if that would be the case.
  • New AFS: Generally, the process of obtaining a new license takes 5 to 6 months. This period encompasses the time to prepare and collect all the necessary documentation, send a request to the regulator, address any issues and, finally, obtain approval for operation.

Please contact us to get more information.

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