The funds industry is currently awaiting the green light on ASIC's proposed changes to the regulation of foreign financial services providers (FFSPs) wishing to provide financial services in Australia.
In the February 2019 edition of Fundamental, we wrote about ASIC extending licensing relief for FFSPs. ASIC released an update to its proposed changes in Consultation Paper 315: Foreign financial services providers, and we are now awaiting the outcome of the consultation process and the implementation of the proposed changes.
ASIC has stated it intends to—
ASIC also proposes to update Regulatory Guide 176 Foreign financial services providers to reflect the proposed changes.
Here, partner Elliott Stumm highlights the key dates and changes proposed by ASIC.
If ASIC's proposed changes are implemented, the following are the key dates you need to be aware of:
The current relief is due to expire on 30 September 2019. ASIC intends to extend the life of the current relief to 31 March 2020. FFSPs relying on the current relief will then have a transitional period to adjust to the new regime, as follows:
A person will only be able to rely on the current relief during the relevant transitional period if the person provided financial services relying on the relief immediately prior to 1 April 2020.
ASIC is proceeding with a new foreign AFS licensing regime for FFSPs that currently rely on the sufficient equivalence relief.
The new foreign AFS licensing regime is a modified form of the standard AFSL regime, and those licensees will be exempt from specified provisions of the Corporations Act on the basis they are subject to—
For example, foreign AFS licensees will be exempt from the obligation to have adequate resources, maintain the competence to provide financial services, and to ensure its representatives are appropriately trained.
Otherwise, a foreign AFS licensee will have the same obligations as a standard AFS licensee, such as the obligation to have systems and processes in place to ensure compliance with the relevant obligations.
To be eligible to apply for a foreign AFSL, an FFSP must be authorised in a specified overseas regulatory regime and also authorised to provide substantially the same financial services as those sought to be provided in Australia under the foreign AFSL.
The following table summarises the "sufficiently equivalent jurisdictions" and the relevant regulator for these purposes:
Sufficiently equivalent jurisdiction
|Germany||Bundesanstalt fŸr Finanzdienstleistungsaufsicht (BaFin)|
|Hong Kong||Securities and Futures Commission|
|Luxembourg||Commission de Surveillance du Secteur Financier|
|United Kingdom||Financial Conduct Authority|
|Singapore||Monetary Authority of Singapore|
|United States||Securities Exchange Commission
Office of the Comptroller of Currency
Commodity Futures Trading Commission
Applicants for a foreign AFSL will be able to apply using a "streamlined" application process. Before commencing an application for a foreign AFSL, the applicant will need to ensure they are eligible to apply for a foreign AFSL and are registered as a foreign company under the Corporations Act (if required to do so).
A foreign AFSL will be subject to the standard AFSL conditions imposed on all AFS licensees, as well as conditions requiring the holder to notify ASIC in writing of the details of certain matters.
ASIC intends to introduce new "funds management financial services relief" commencing 1 April 2020. The relief will replace the old "limited connection" relief and will enable a foreign company to provide funds management financial services in Australia without holding an AFSL.
The exemption from the need to hold an AFSL will only be available where the foreign company is carrying on a financial services business in Australia by virtue of engaging in conduct intended (or likely) to induce people in Australia to use the financial services they provide. The relief will not be available to a foreign company registered under the
Corporations Act. Generally, a foreign company will need to be registered if it carries on a business in Australia, including where it is deemed to be carrying on a business, such as by having a place of business in Australia.
For the purposes of the relief, the provision of any of the following services by a person constitutes the provision of a "funds management financial service":
If a foreign company wishes to rely on the relief, the company must apply to ASIC and demonstrate it meets the eligibility criteria. It is proposed one of the criteria will be a cap on the scale of activities conducted by the FFSP. That is, less than 10 percent of its gross revenue (or consolidated gross revenue) can be derived from the provision of funds management financial services.
Those having the benefit of the new relief will also be subject to a number of conditions, including the following:
We will keep you up to date with the next steps and implementation of the new regime.