International: ASIC (again) extends transitional relief for foreign financial service providers

0

In short

The Australian Securities and Investments Commission (ASIC) has again extended the transitional relief period for foreign financial service providers (FFSPs) by a further 12 months to 31 March 2024, thanks to the introduction of the ASIC Corporations (Amendment) Instrument 2022/623 (“Instrument of amendment“) on July 28, 2022.

ASIC said the amendment instrument was introduced to provide certainty to the industry in view of the expiration of the Treasury Laws Amendment Bill 2022 (Streamlining and Improving Economic Outcomes for The australians) (“Invoice“), discussed in more detail in our previous alert available here.


Contents

  1. More in detail
  2. Current and Future Options for FFSPs
  3. ASIC Instrument Amendments
  4. Timeline of the transitional relief period
  5. Next steps

As ongoing extensions of transitional relief have become confusing, an overview of the timeline is briefly presented below and in the explanatory memorandum.

In summary, the transition period is now extended until March 31, 2024 for FFSPs relying on:

  • wholesale customer limited connection exemption; Where
  • the “sufficient equivalence” passport of their offshore license in Australia (only if you are already using this option on March 31, 2020).

The Instrument of Amendment also delays the start of the proposed relief for “foreign fund managers” to April 1, 2024.

The expiration of the Bill suggests that we are unlikely to see a further amended Limited Connection/Professional Investor Exemption or a fast-track licensing process for overseas Australian financial services licenses (“Foreign AFSL“).

At this stage, the extended transition period is not helping new entrants access the Australian market, noting that ASIC has said it will instead provide tailored relief to new applicants (presumably on the same terms as exemptions). passport class order provided they are regulated by one of the approved regulators).

It is still possible to apply for a foreign AFSL. To go down this route, the process should be started as early as possible to allow time for the license application to be processed.

The current options available for FFSPs to operate in Australia are now (roughly):

  1. if the FFSP does not carry on other business in Australia – use the extended Limited Connection Class Order sunset to work with Australian wholesale customers until March 31, 2024;
  2. if the FFSP is operating in Australia and relied on the Passport Exemption as of March 31, 2020 – use the extended Passport Class Orders sunset to work with Australian wholesale customers until March 31, 2024; and
  3. if the FFSP is operating in Australia and has NOT relied on the Passport Exemption as of March 31, 2020 – apply for a tailored waiver to rely on conditions similar to Passport Class Orders to work with clients Australian wholesalers until March 31, 2024 and/or apply for an overseas AFSL.

And from April 1, 2024:

  1. whether the FFSP can work within the limits of the proposed exemption for “foreign fund managers” – rely on this exemption from 1 April 2024;
  2. if the FFSP needs a broader authorization from April 1, 2024 – search for a foreign AFSL (better to start this process as soon as possible); and
  3. otherwise rely on other financial services license exemptions – (for example, limiting activities to reverse inquiry or acting on behalf of a licensee as an authorized representative).

The Instrument of Amendment amended the following instruments:

  • Instrument 2016/396 on ASIC companies (repeal and transition);
  • ASIC Corporations (Foreign Financial Services Providers—Limited Connection) Instrument 2017/182; and
  • Instrument 2016/1109 on ASIC companies (financial service providers regulated by the CSSF).

Together, these have the effect of providing transitional relief to a range of FFSPs that rely on the existing exemption framework from the requirement to hold an Australian financial services licence, pending the outcome of any consultations even further on the regulation of FFSPs.

The Instrument of Amendment also delays the start of license relief for certain fund management financial service providers until April 1, 2024 under the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199.

  • September 2016: ASIC presents the Instrument 2016/396 on ASIC companies (repeal and transition).
  • November 2016: ASIC presents the Instrument 2016/1109 on ASIC companies (financial service providers regulated by the CSSF).
  • March 2017: ASIC presents the (Foreign Financial Service Providers — Limited Connection) Instrument 2017/18.
  • 2018 and 2019: ASIC is extending the period of transitional relief granted under the instruments listed above.
  • March 2020: ASIC extends the transitional relief period by an additional 2 years until March 31, 2022 by amending the Instrument 2016/396 on ASIC companies (repeal and transition) and the (Foreign Financial Service Providers — Limited Connection) Instrument 2017/18.
  • March 2020: The ASIC emits the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199 which is scheduled to start on April 1, 2022 (this has been postponed to April 1, 2023).
  • May 2021: The former Australian government announces that it will consult on regulatory relief for FFSPs.
  • June 2021: ASIC extends the transitional relief period by an additional 12 months until March 31, 2023 by amending the Instrument 2016/396 on ASIC companies (repeal and transition) and the (Foreign Financial Service Providers – Limited Connection) Instrument 2017/18.
  • February 2022: The government introduces the Treasury Acts (Streamlining and Improving Economic Outcomes for Australians) Amendment Bill 2022 (which expired upon the change of government on April 11, 2022).
  • July 2022: ASIC extends the transitional relief period by an additional 12 months until March 31, 2024 through the introduction of the ASIC Corporations (Amendment) Instrument 2022/623.

FFSPs should continue to consider to what extent they can continue to rely on the current exemption regime and whether they should start or restart the preparation of a license application. It is unclear whether the current government intends to reintroduce the bill, but we will provide details on any future developments regarding FFSPs as they arise.

If you need help evaluating your options, please contact us.

Share.

About Author

Comments are closed.