As Australia splutters into its new economic saviour, fintech (first there were sheep, then natural resources), the Turnbull government is yet to get ASIC on board. It can be argued that ASIC has a two-pronged approach to Australian Financial Services Licence (AFSL) holders taking on foreign clients. In an era where the Australian Government is attempting to make Australia a global competitor and encourage foreign investment into Australia, this is problematic to say the least.
In our experience, it appears that ASIC asserts that AFSL holders cannot onboard and transact with foreign clients as these clients are not protected by ASIC regulation or the AFSL. This is most clearly seen where ASIC has warned AFSL holders, in particular CFD and FX brokerages, about the risks of onboarding foreign clients. Just yesterday we saw a similar release relating to IKON which holds an AFSL. In particular, ASIC asserts that foreign clients are not protected by Australian regulation. CFD and FX brokerages have been instructed to restrict their offerings to Australian clients only, unless they hold the applicable licence in the foreign jurisdiction from where the client originates.
However, it is interesting to note that External Dispute Resolution Schemes (EDRS) such as the Financial Ombudsman Service (FOS) will accept complaints from foreign clients. So too will Australian courts. AFSL holders enter into a contract with foreign clients to provide the financial services. These contracts are enforceable under Australian common law, meaning that where a contract becomes the subject of litigation it is enforceable under a court ruling.
This lack of continuity in regulation between ASIC, the courts and the EDRS system causes confusion within the industry for AFSL holders and clients alike.