The Australian Securities and Investments Commission (ASIC) has announced a 12 month extension of its transitional relief for foreign financial services providers (FFSPs) providing financial services in Australia without holding an Australian financial services licence (AFSL).
Under ASIC Corporations (Amendment) Instrument 2022/623 (Instrument), ASIC has extended availability of the following exemptions for FFSPs until 31 March 2024:
- “Sufficient equivalence relief” (colloquially referred to as “passport relief”), which was available to certain FFSPs providing financial services to wholesale clients only, where such FFSPs are regulated by a foreign regime considered by ASIC to be “sufficiently equivalent” to the Australian regime. This extension only applies to FFSPs that were entitled to rely on passport relief as at 1 April 2020.
- “Limited connection relief”, being relief available to an FFSP that is not carrying on a business in Australia under the ordinary tests but is deemed to be carrying on a financial services business in Australia only because it is inducing, or intending to induce, a person in Australia to use its financial services, and where such services are provided to wholesale clients only.
The Instrument has also delayed the commencement of funds management relief until 1 April 2024. Under funds management relief, eligible FFSPs are not required to hold an AFSL if the FFSP is carrying on a financial services business by engaging in ‘inducing’ conduct while providing certain funds management financial services to certain Australian investors.
Why has there been another extension?
The news comes after Treasury’s consultation in 2021, which explored options to restore regulatory relief for FFSPs and create a fast track licensing process for FFSPs and legislation introduced to Parliament in February 2022 to give effect to the proposed reforms. In short, the legislation sought to introduce an expanded comparable regulatory regime for FFSPs regulated offshore, introduce a professional investor exemption permitting limited onshore marketing visits by FFSPs and exempt certain FFSPs applying for an AFSL in Australia from undertaking the full fit and proper person requirements.
With the Federal election and change of Government in May 2022, the bill lapsed and the new Government has not announced its intentions regarding the future of FFSP regulation in Australia. While ASIC has not announced a specific reason for the extension, it is likely that the extension has been announced to allow the new Government time to consider legislative reforms for FFSPs without adversely affecting FFSPs currently operating in or wishing to operate in Australia.
We have set out an overview below of the next steps for FFSPs.