ASIC is proposing to introduce a modified licensing regime for foreign financial services providers (FFSPs) wishing to provide financial services in Australia, that will replace the existing “sufficient equivalence” relief granted to FFSPs from the requirement to hold an AFS licence where those FFSPs are regulated by an equivalent overseas licensing regime and provides financial services only to wholesale clients in Australia.
The current relief regime has improved the ease with which FFSPs conduct financial services activities affecting or involving Australia counterparts, including a reduction of the costs of compliance.
However, issues of non-compliance by FFSPs with the conditions of existing relief and the practical difficulties experienced by ASIC in relation to monitoring and supervising the financial service activities of FFSPs in Australia and enforcing overseas regulatory requirements, has prompted a need to adopt a modified relief regime that strengthens the regulator’s ability to respond to risks in wholesale markets.
Specifically, ASIC is proposing to repeal the current relief framework and implement a modified licensing regime that will allow FFSPs to apply for a “foreign AFS licence”. Under the new foreign AFS licensing regime, it is proposed that a foreign AFS licensee:
- will be required to comply with the general AFS licensee obligations under s 912A(1)-(ca) of the Act (including the obligation to have in place adequate conflict management and risk management systems), as well as some additional obligations tailored to FFSPs; but
- will not be required to comply with the general obligations under s 912A(1)(d)-(f) and (j), such as the requirement to have adequate resources (including financial, technological and human resources) to provide the financial services covered by the licence and ensure adequate training of authorised representatives.
The new regime will grant ASIC greater powers when dealing with FFSPs. It is hoped that the enhanced oversight and control which ASIC will have over FFSPs under the proposed foreign AFS licensing regime will address the issues currently experienced from a supervisory and enforcement perspective, and better align Australia ‘s approach to AFS licensing relief to that in other major jurisdictions.
It is envisaged that applicants for foreign AFS licensee status will be required to provide similar core and additional support proof documentation to that required in an application for an ordinary AFS licence. By adopting a consistent approach to all licensing applications, it is hoped that this will enable more timely assessment of applications.
The current relief framework has been extended to 30 September 2019 to allow time for industry to engage with ASIC’s proposals for a modified framework.