Australia: ASIC Provides Further Details Of New Licensing Regime For Foreign Financial Service Providers ("FFSP")

Last Updated: 26 July 2019
Article by Martin Jamieson and Timothy Lou

If you or your overseas headquarters, entities or other operations are, or are considering, providing financial services in Australia, now is the time to review your operations and re-position yourself in light of the new details of the proposed changes by ASIC released on 3 July 2019.

The Australian Securities & Investments Commission ("ASIC") released a consultation paper on 3 July 2019, namely CP315 which included as attachments, a draft updated RG 176 and two draft ASIC instruments. This represents the next chapter of ASIC's plans to amend the legal landscape for overseas financial service providers carrying on business in Australia, a proposal which we covered previously. In summary, the new CP315 published by ASIC outline the following proposed changes.

  • Confirm that ASIC will be proceeding with the proposed foreign AFS licensing regime and provide further detail about the new regime;
  • replace the limited connection relief with "Funds Management Relief";
  • replace Information Sheet 157 with an updated version of Regulatory Guide 176 ("RG 176"); and
  • outline ASIC's current position on reverse solicitation relief.

ASIC have invited submissions on the proposals set out within these documents by 9 August 2019.

1. Who does this impact?

These changes only impact you if you provide or intend to provide financial services in Australia to wholesale clients only. If you provide financial services to retail clients, you will likely be caught by the standard Australian financial services licensing regime.

The changes will impact the following FFSPs.

1.1 FFSPs in sufficiently equivalent jurisdictions

If you or your foreign office are based in and regulated by Germany (BaFin), Hong Kong (Securities and Futures Commission), Luxembourg (Commission de Surveillance du Secteur Financier), United Kingdom (Financial Conduct Authority), Singapore (Monetary Authority of Singapore) or the United States (Federal Reserve, Office of the Comptroller of Currency or Commodity Futures Trading Commission), you can proceed to directly applying for a foreign Australian financial services licence ("Foreign AFS Licence").

You will be able to apply for a Foreign AFS Licence from 1 April 2020.

An additional 2 years will be given to FFSPs eligible for transitional arrangements, such that they will be expected to have received a Foreign AFS Licence (or be otherwise compliant) and have the compliance arrangements in place to comply with all its obligations by 31 March 2022. You must apply for class order relief under the current regime by 1 April 2020 and be able to rely on that relief by 31 March 2020 to be eligible for this additional transition time.

1.2 FFSPs not in a sufficiently equivalent jurisdiction

If you are not based in any of the aforementioned jurisdictions, you may apply to ASIC to extend the sufficient equivalence relief to your overseas regulatory regime. Starting from 1 April 2020, a more streamlined assessment process will be in place.

1.3 FFSPs providing "fund management financial services'

If you are an offshore fund manager, you may be able to rely on the proposed relief in ASIC Corporations (Foreign Financial Services Providers - Funds Management Financial Services) Instrument 2019/XXX ("Fund Manager Relief"), newly introduced by ASIC in CP315 with a tentative start date of 1 April 2020 for this relief.

1.4 FFSPs currently relying on limited connection relief

If you are currently relying on the limited connection relief in the ASIC Corporations (Foreign Financial Services Providers - Limited Connection) Instrument 2017/182 - it will only be extended to 31 March 2020.

You will have 6 months to 30 September 2020 to make the necessary arrangements to fall within one of the licences or exemptions in this article.

1.5 Other FFSPs

If you do not qualify for any of the licences or exemptions outlined so far, you should seek advice about whether you should apply for a standard Australian financial services licence, become an authorised representative of a licensee or otherwise qualify for the Australian licensing exemptions in Ch 7 of the Corporations Act 2001 (Cth) ("Corporations Act") and associated regulations.


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