Foreign financial services providers offering services to wholesale clients in Australia should consider the impact of ASIC’s proposed foreign Australian Financial Services licence on their business.
The Australian Securities and Investments Commission (ASIC) released a consultation paper on 1 June 2018 proposing a modified licensing regime for foreign financial services providers (FFSPs) carrying on a financial services business in Australia with wholesale clients (CP 301).
Currently, FFSPs providing financial services to wholesale Australian clients are not required to hold an Australian financial services licence (AFSL) in certain circumstances under existing ASIC instrument-based relief, broadly known as:
- sufficient equivalence relief: which is based on ASIC’s assessment of the overseas regulation of the relevant FFSP achieving similar regulatory outcomes as the Australian regulatory requirements (see the ASIC Corporations (Repeal and Transitional) Instrument 2016/396); and
- limited connection relief: which exempts FFSPs that are only engaged in inducing, or intending to induce, a person in Australia to use its financial services (see the ASIC Corporations (Foreign Financial Services Providers – Limited Connection) Instrument 2017/182).
These instruments are due to sunset on 27 September 2018.
ASIC has also issued individual relief (often for a more limited range of financial services), on similar terms to the sufficient equivalence relief, to FFSPs providing financial services to wholesale clients in Australia which are not covered under the sufficient equivalence instrument.
ASIC’s Proposal: a Foreign AFSL
CP 301 sets out ASIC’s proposal to enable FFSPs to apply for a modified form of AFSL (Foreign AFSL). The current sufficient equivalence relief (and any individual relief issued on similar terms to it) and the limited connection relief would be repealed, with ASIC extending the current relief for 12 months until 30 September 2019 while consulting with stakeholders.
ASIC proposes a further transition period of 12 months to 30 September 2020 if it proceeds with the proposed Foreign AFSL regime to enable entities relying on current relief to obtain either an AFSL or a Foreign AFSL in relation to their activities in Australia.
A Foreign AFSL holder will be exempt from certain requirements of the Corporations Act 2001 (Cth) and associated regulations where the regulatory outcomes of an overseas regulatory regime is determined as sufficiently equivalent to the Australian requirements.
ASIC invites submissions on CP 301 by 31 July 2018.
FFSPs currently carrying on a financial services business in Australia with wholesale clients, or intending to do so, are urged to consider the terms of CP 301 carefully.
Contact Hive Legal
Contact John Malon, David Reckenberg, Rebecca Lim or Mona Sukkar at Hive Legal if you wish to make a submission to ASIC before the 31 July 2018 deadline, or have any questions about how the Foreign AFSL proposal may affect your financial services business in Australia.
This is for general information only and formal legal advice should be sought on matters of interest arising from this article.