ASIC has released its new regulatory framework for foreign financial services providers (FFSPs) providing financial services to Australian wholesale clients.
‘Our new regulatory framework facilitates Australian wholesale access to foreign investment opportunities, preserves market integrity against misconduct in wholesale markets, and strengthens ASIC’s ability to take effective regulatory and supervisory action,’ said ASIC Commissioner Cathie Armour.
‘Our ability to effectively supervise all participants in Australian markets is crucial for the confident participation of investors.’
The new framework has two key elements:
- a new foreign Australian financial services (AFS) licensing regime for FFSPs, and
- licensing relief for providers of funds management financial services seeking to induce some types of professional investors.
It replaces ASIC’s previous licensing exemptions for foreign providers. We have developed this new framework through extensive consultation with industry and overseas regulators. ASIC’s updated Regulatory Guide 176 Foreign financial services providers (RG 176) contains the details of the new framework. There is a two year transition period to this new regime.
Foreign AFS licensing regime
From 1 April 2020, new foreign providers may apply to obtain a foreign AFS licence to provide financial services in Australia to wholesale clients. To be eligible, the foreign provider must be authorised under an overseas regulatory regime that ASIC has assessed as sufficiently equivalent to the Australian regulatory regime.
An FFSP holding a foreign AFS licence will be exempt from certain obligations that apply to AFS licensees, such as financial requirements, as ASIC acknowledges that similar regulatory supervision and outcomes will be achieved by the equivalent overseas requirements.
Foreign providers currently relying on pre-existing relief will have a two-year transition period until 31 March 2022 to make arrangements to continue their operations in Australia, which may include applying for a foreign AFS licence.
Funds management licensing relief
Funds management licensing relief will commence on 1 April 2022. The relief is available to foreign providers inducing certain types of Australian professional investors to use the funds management financial services it provides. Under the relief, a licence is not needed for that inducing conduct. Inducing conduct includes attempts to persuade, influence or encourage a particular person to become a client, for example, mass marketing campaigns.
Foreign providers must separately consider if they need to hold a licence to actually provide financial services.
- RG 176 Foreign financial services providers
- REP 656 Response to submissions on CP 301 and CP 315 on foreign financial services providers
- ASIC Corporations (Foreign Financial Services Providers – Foreign AFS licensees) Instrument 2020/198
- ASIC Corporations (Foreign Financial Services Providers – Funds Management Financial Services) Instrument 2020/199
- ASIC Corporations (Amendment) Instrument 2020/200
- CP 301 submissions
- CP 315 submissions
Generally, you must hold an AFS licence to carry on a financial services business in Australia.
Since 2003, ASIC has provided two types of licensing relief to foreign providers of financial services to wholesale clients in Australia:
- sufficient equivalence relief, and
- limited connection relief.
ASIC has also provided some entities with individual relief.
Those forms of relief are being replaced with the current measures.
Detailed information about transitional arrangements, including for individual relief holders is set out in RG 176 and INFO 157.
If you have any questions about reliance on existing sufficient equivalence relief, individual relief or limited connection relief, please contact FFSP@asic.gov.au
© Australian Securities & Investments Commission. Reproduced with permission.