ASIC’s new framework replaces the existing regime and provides clarity for foreign financial services providers who provide financial services to professional investors and wholesale clients in Australia.
ASIC’s Regulatory Guide 176: Foreign financial services providers introduces a new framework which replaces previous licencing exemptions available to foreign financial services providers (“FFSP”).
Since 2003, ASIC has provided two types of relief to foreign providers: sufficient equivalence relief and limited connection relief. ASIC also provided avenues for bespoke individual relief upon application. The new framework replaces this existing relief and opens the door for FFSPs to apply for a foreign Australian Financial Services (“AFS”) licence.
This change seeks to enhance ASIC’s ability to monitor all participants within the Australian market in order to combat the misconduct that Australian consumers have experienced.
What does this new framework look like?
The new framework:
- repeals the equivalence relief and limited connection relief licensing exemptions;
- introduces a foreign AFS licence from 1 April 2020 for new foreign providers; and
- updates relief for Fund Managers.
FFSPs that currently rely on pre-existing relief will have a two year transitional period (until 31 March 2022) to make arrangements to continue operating within Australia. In some instances, this may include applying for a foreign AFS licence.
The new Foreign AFS Licence
The new licence includes compliance and monitoring obligations whilst still capturing the essence of the previous exemptions by precluding compliance from certain provisions in Chapter 7 of the Corporations Act 2001. Exempted provisions include the requirements to ensure that representatives are appropriately trained and having adequate financial resources for custodial or depository service providers.
There is a streamlined application process for the foreign AFS licence, on the basis and expectation that foreign AFS licensees will be authorised under and compliant with equivalent overseas regulatory regimes.
That said, ASIC has reminded applicants to consider whether their business structure is suitable for the licence before applying – reiterating that the licence will not exempt an entity from any obligations that arise from providing financial services to retail clients.
Updated relief for Fund Managers
FSSPs will be exempt from the requirement to hold an AFS licence when the FFSP is only delivering fund management financial services to certain types of professional investors in Australia. This will mean that, from 1 April 2022, an AFS licence is not required for conduct that only attempts to persuade, influence or encourage a person to become a client (“inducing conduct”).
If you are an FFSP and need further information on these new requirements please reach out to our Financial Services team who can help you navigate the new framework – Contact Us
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