Australian regulator extends licensing relief for foreign financial services providers

The Australian Securities and Investments Commission (ASIC) has earlier today announced an extension to the licensing relief for foreign financial services providers (FFSPs).

The relief, which is now extended until September 30, 2019, allows FFSPs to provide financial services to Australian wholesale clients without needing to hold an Australian financial services licence.

The licensing relief that is extended by ASIC is in the following instruments:

• ASIC Corporations (Repeal and Transitional) Instrument 2016/396 and ASIC Corporations (CSSF-Regulated Financial Services Providers) Instrument 2016/1109. FFSPs relying on this relief can provide specified financial services to Australian wholesale clients if their home regulatory regime has been assessed by ASIC as sufficiently equivalent to the Australian financial services licensing regime;
• ASIC Corporations (Foreign Financial Services Providers—Limited Connection) Instrument 2017/182. This provides licensing relief for FFSPs limited to inducing an Australian wholesale client to use the provider’s financial services.

ASIC had earlier indicated that it might provide such an extension. ASIC released a consultation paper on the matter on June 1, 2018 following a review of the regulatory settings for foreign financial services providers. The review identified some supervisory and regulatory concerns about the operation of the relief.

The consultation paper proposes a modified licensing regime for foreign financial service providers carrying on a financial services business in Australia with wholesale clients. These foreign providers are global investment banks or wholesale managed funds. This approach would provide ASIC with a broader range of tools to regulate the activities of foreign providers in Australia.

The paper outlines ASIC’s proposal to enable foreign providers to apply for a modified form of Australian financial services (AFS) licence (foreign AFS licence). Currently foreign providers of services to wholesale clients are not required to hold an AFS licence in some circumstances under ASIC relief.

Providers holding a foreign AFS licence will be exempt from certain licensee provisions under the Corporations Act. This is on the basis that there are similar regulatory outcomes achieved through the regime applying to the foreign provider in its home jurisdiction.

ASIC considers that it is important for foreign providers to adhere to fundamental conduct obligations in the AFS licensing regime that govern how financial services are provided to Australian wholesale clients and promote market integrity.

In today’s announcement, ASIC says it is reviewing the 36 submissions it received on its proposals in the consultation paper to revoke the relief and introduce a modified licensing regime for FFSPs. The regulator anticipates engaging over the next few months with industry participants about their responses to the proposals in the paper.