ASIC has released a consultation paper CP 301 Foreign financial services providers proposing a modified licensing regime for foreign financial service providers carrying on a financial services business in Australia with wholesale clients. These foreign providers are global investment banks or wholesale managed funds.
The proposal would require foreign financial services providers who currently are eligible for relief to apply for a modified form of Australian financial services (AFS) licence (foreign AFS licence).
Foreign AFS licence
The proposal would:
(a) require a foreign AFS licensee to comply with the general obligations under s912A(1)(a)–(ca) and (h) of the Corporations Act, but not the general obligations in s912A(1)(d)– (f) and (j);
(b) exempt a foreign AFS licensee from the application of particular provisions of Ch 7 of the Corporations Act and the Corporations Regulations 2001 (Corporations Regulations) where ASIC considers the overseas regulatory requirements achieve similar regulatory outcomes to the Australian requirements;
(c) impose tailored conditions on a foreign AFS licensee, including some additional obligations by legislative instrument; and
(d) require a foreign AFS licence applicant to provide similar documentation in support of their application as that required for an ordinary AFS licence.
Currently, a person who carries on a financial services business in Australia must hold an Australian financial services licence unless relief is granted by ASIC or an exemption applies.
ASIC has given two types of relief to foreign financial services providers that provide financial services to wholesale clients in Australia:
• ‘sufficient equivalence relief’, which is based on its assessment of the overseas regulation of the foreign entity as achieving similar regulatory outcomes as the Australian regulatory requirements that apply to financial services providers in Australia; and
• ‘limited connection relief’, which exempts foreign financial services providers that do not operate in Australia and are only engaged in inducing, or intending to induce, a person in Australia to use its financial services.
The proposals would:
(a) repeal the sufficient equivalence relief on 30 September 2019 and allow FFSPs to apply for a ‘foreign AFS licence’;
(b) repeal the limited connection relief on 30 September 2019 to allow FFSPs to apply for a foreign AFS licence.
The current foreign provider licensing relief is due to sunset on 27 September 2018. ASIC will extend the current relief for 12 months until 30 September 2019 while it consults with stakeholders.
The consultation paper proposes a further transition period of 12 months to 30 September 2020 if ASIC proceeds with foreign AFS licensing.
UPDATE 25 September 2018
ASIC has extended to 30 September 2019 licensing relief for foreign financial services providers to allow them to provide financial services to Australian wholesale clients without needing to hold an Australian financial services licence: ASIC Corporations (Amendment) Instrument 2018/807