Changes to Licensing Relief Frameworks for Foreign Financial Service Providers are Fast Approaching – are you prepared?

ASIC’s new licensing relief framework for Foreign Financial Service Providers (“FFSPs”) took effect on 1 April 2020. FFSPs relying on Limited Connection Relief and Sufficient Equivalence Relief now have less than one month to move across to ASIC’s new framework in order to continue operations in Australia. 

The new framework replaces ASIC’s previous licensing exemptions for FFSPs and has two key elements:

  1. a new foreign Australian Financial Services (“AFS”) licensing regime; and
  2. licensing relief for providers of funds management financial services seeking to induce some types of professional investors.

The New Foreign AFS Licensing Regime

As of 1 April 2020, FFSPs may be eligible to apply for a modified form of AFS licence, known as a ‘foreign AFS licence’.

FFSPs can apply if they:

  • are authorised under a ‘sufficiently equivalent’ overseas regulatory regime;
  • are a registered foreign company if required by the Corporations Act 2001 (Cth);
  • provide the necessary proof documents to ASIC;
  • understand and are able to comply with the stipulated obligations and conditions of the AFS licence; and
  • lodge and pay the application fee.

FFSPs currently relying on pre-existing relief have until 31 March 2022 to make the necessary arrangements in order to continue operations in Australia, which may include applying for a foreign AFS licence. Please see our previous blog on FFSP licensing relief for further details on ASIC’s transitional arrangements.

Funds Management Licensing Relief

Funds management relief will come into effect 1 April 2022 and may give relief to a FFSP from the requirement to hold an AFS licence if the FFSP is inducing certain types of Australian professional investors to use the funds management financial service it provides. Under the relief, an AFS licence is not needed for inducing conduct. Inducing conduct include attempts to persuade, influence or encourage a particular person to become a client, such as mass marketing campaigns.

Next Steps

FFSPs must consider the new arrangements and assess their impact upon existing or potential services offered to wholesale clients or investors in Australia to determine the most suitable option to maintain operations in Australia. ASIC recommends any AFS licensing applications under the new regime should be initiated as soon as possible due to the potential large volume of applications and subsequent processing timeframes.

Background Information

Since 2003, ASIC has provided various relief to foreign providers of financial services to wholesale clients in Australia. All forms are now being replaced with the aforementioned measures as outlined in ASIC’s updated Regulatory Guide 176 (“RG 176”).

Further Reading

If you are an existing or potential FFSP and would like further advice on how the new regimes will affect you or the best approach for your business, please contact us directly.

About The Author

Sarah Murray

Sarah works with the Compliance Team with a particular focus on compliance and legal services. Sarah works with the Legal Team providing ongoing assistance in drafting and reviewing documentation as well as legal research. Sarah assists clients with AFSL and ACL applications, variations and also assists in the implementation of compliance reviews. She provides ongoing compliance support in the form of compliance program implementation and reviews.