ASIC consults on relief for foreign providers of funds management services to Australian professional investors

ASIC has today released a consultation paper proposing to provide licensing relief for foreign financial services providers of funds management services in Australia to professional investors.

Consultation Paper 315 Foreign financial services providers: Further consultation (CP 315) sets out our proposal to:

  • Provide funds management relief – foreign providers will be exempt from the requirement to hold an Australian Financial Services (AFS) licence to provide services to professional investors in Australia. We propose a cap on the scale of activities that may be undertaken in Australia; and
  • Repeal the licensing relief known as ‘limited connection’ relief as we previously proposed in Consultation Paper 301 Foreign financial services providers (CP 301). Foreign financial services providers may still access the proposed new funds management relief and the licensing exemptions in the Corporations Act 2001 and Corporations Regulations 2001.

We decided against giving relief for the situation where an Australian professional client initiates an inquiry or request to a foreign service provider operating outside Australia (reverse solicitation). We are not currently minded to provide this relief due to the lack of information from industry about how it would be used and our concerns about monitoring compliance with its conditions. CP 315 seeks further information on this.

Our proposals reflect earlier feedback from industry that there is a need for Australian professional investors to access funds management financial services providers outside Australia.  This proposal aims to strike an appropriate balance between facilitating cross-border investment as well as maintaining Australian market integrity and investor protection.

Extension of limited connection relief while ASIC consults

The current ‘limited connection’ relief is due to expire on 30 September 2019. We will extend the relief for a further six months until 31 March 2020 while we consult with stakeholders on the funds management relief and repeal of the ‘limited connection’ relief. ASIC proposes a transition period of six months to 30 September 2020 should we proceed with the repeal of the ‘limited connection’ relief, enabling foreign providers to seek an AFS licence if applicable.

Implementation of foreign AFS licence and extension of sufficient equivalence relief

ASIC will be implementing the foreign AFS licensing regime for foreign financial services providers relying on the licensing relief known as ‘sufficient equivalence’ relief. We proposed this relief in CP 301. The draft updated RG 176 attached to CP 315 provides guidance on how foreign providers may apply for the foreign AFS licence.

We will extend the sufficient equivalence relief for a further six months until 31 March 2020 to allow foreign providers to engage with the details of the guidance. The new foreign AFS licensing regime will commence on 1 April 2020. Foreign providers currently relying on the sufficient equivalence relief will have a transition period of 24 months from 1 April 2020 to comply with the new regime, including for example to submit an application for a foreign AFS licence and have the application assessed by ASIC.

For reference:


Limited connection relief

In this consultation paper, we propose to repeal the limited connection relief.

In 2003, we issued Class Order [CO 03/824] Licensing relief for financial services providers with limited connection to Australia dealing with wholesale clients that provides licensing relief to foreign financial services providers with a limited connection to Australia providing services to wholesale clients. The relief covers situations where a foreign provider is taken to be carrying on a financial services business because it has engaged in conduct that is intended to induce an Australian wholesale client to use the financial services it provides or is likely to have that effect.

Sufficient equivalence relief

The foreign AFS licensing regime replaces the sufficient equivalence relief.

In 2003 and 2004, ASIC made seven class orders that conditionally exempted foreign providers from the requirement to hold an AFS licence where they are regulated under overseas regulatory regimes that ASIC has assessed as sufficiently equivalent to the Australian financial services regime.

© Australian Securities & Investments Commission. Reproduced with permission.