The release of the 2021-22 Federal Budget has produced unexpected measures for Foreign Financial Service Providers (‘FFSPs’) which casts short term uncertainty for those seeking to comply with the FFSP Licensing regime.
Background to FFSPs and Licensing
FFSPs that were providing financial services in Australia were previously afforded relief from the AFS Licensing regime under legislative instruments referred to as the Limited Connection and the Sufficient Equivalence relief. From 1 April 2020 the FFSP Licensing regime replaced the sufficient equivalence relief, with a new relief for Fund Managers due to replace the Limited Connection relief in March 2022. In this article we discuss the sufficient equivalence relief and the FFSP Licensing regime.
Requirements of the FFSP Licensing Regime
The FFSP Licensing regime requires eligible FFSPs to apply for an FFSP Licence, akin to an AFS Licence, but with fewer obligations under Chapter 7 of the Corporations Act 2001 (Cth) and limited to FFSPs that service Wholesale Investors. The introduction of the FFSP Licensing regime brought with it a two year transition period until March 2022, available to those FFSPs that received written notice from ASIC that they were able to rely on the sufficient equivalence relief before 1 April 2020.
Impact of the Federal Budget
The release of the 2021-2022 Federal Budget measures include a suggestion that the Government may now discard the FFSP Licensing regime. The measures suggest the Government will be consulting on options to reinstate the previous relief, in a bid to achieve deregulation to influence greater investment in Australia from offshore. That is, to reduce the disincentives for FFSPs to provide financial services in Australia.
The Role of ASIC
ASIC’s approach to transition periods has often included an expectation that those that benefit from the transition period do everything possible to become compliant within the transition period as soon as possible, rather than waiting until the last possible opportunity. Practically this means that there will be a number of FFSPs who:
- are either already in the process of preparing an application for an FFSP Licence and are navigating the lack of clarity in the guidance;
- have already submitted an application (including those awaiting with bated breath ASIC’s response to their decision not to register as a foreign company, and similarly those now questioning whether they needed to register); or
- are about to commence preparation of an application.
Moving Forward in Uncertainty
Whichever boat you are in, the moral of the story remains the same – there will be short term uncertainty with a shimmer of hope of long-term benefits, but at this stage only time will tell. If you are an FFSP questioning what your next steps should be, contact us for a confidential discussion about your situation and short-term strategies that may be available to you.
This publication has been prepared for general guidance on matters of interest only and does not constitute professional legal advice. You should not act upon the information contained in this publication without obtaining specific professional legal advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication and to the extent permitted by law, Cowell Clarke does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting or refraining to act in relation on the information contained in this publication or for any decision based on it.