Two phrasings of one question: does an STC trader need an Australian Financial Services Licence, and what about its licence in particular. The answer is nuanced, and this is general information, not legal advice.
The starting point
An AFSL is required to carry on a financial services business, which means dealing in or advising on financial products. Whether a certificate is a financial product depends on what it is.
- Carbon credit units, such as ACCUs, are treated as financial products, so trading in them can need a licence.
- Renewable energy certificates, including STCs and LGCs, are created under the Renewable Energy (Electricity) Act and are generally treated as commodities. Buying and selling them in the spot market is generally not a financial service.
- ASIC’s guidance says whether other emissions units are financial products depends on whether they meet the general definition in the Corporations Act, and that is a case-by-case question.
When a licence might come into play
Even if the certificate is a commodity, how it is traded can change the answer:
- A forward contract to deliver certificates at a future date and a fixed price can start to look like a derivative.
- A pooled or managed arrangement, where you hand over certificates to be traded on your behalf for a return, can look like an investment product.
- Advice about trading certificates as an investment can be financial product advice.
A trader that simply buys your certificates at a posted rate and pays you is not in that territory. A trader offering something more elaborate may be.
What to ask a trader
- Does the business hold an AFSL, and for what authorisations?
- How does it classify the arrangement it is offering you?
- Are forward contracts, or any investment-style arrangements, on offer?
- Does it have its own legal advice on this?
You can check any AFSL on the ASIC Professional Registers, including the licence number and what it covers.
What this means for installers
For a straightforward sale of STCs at a published rate, the licence question is rarely the deciding one. The checks that matter day to day are the ABN, the registered agent status where relevant, written terms and a record of paying on time. Our trader legitimacy checklist puts them in order. If a trader pitches certificates as an investment, or asks you to commit volume for a fixed price in the future, ask for the licensing position in writing.
See also the contract checklist, what a registered agent is and how our process works on how it works. Rates are on pricing.