In welcome news for foreign financial services providers (FFSPs) already providing financial services in Australia, ASIC has announced the anticipated extension of its transitional relief for FFSPs from the requirement to hold an Australian financial services licence (AFSL).
What has been extended?
Under ASIC Corporations (Amendment) Instrument 2021/510, ASIC has extended availability of the following exemptions for FFSPs by 12 months such that each exemption will apply until 31 March 2023:
- “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.
- “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.
Why has transitional relief been extended?
The news follows the Federal Government’s announcement as part of its Budget measures last month that it intends to consult on options to restore regulatory relief for FFSPs.
The Federal Government has not yet announced the timing of its consultation but ASIC’s announcement has provided time for FFSPs to take a ‘wait and see’ approach regarding the outcome of the consultation.
What next for FFSPs?
Thankfully, the extension has made clear the short to medium term next steps for FFSPs. We have set out an overview below:
- FFSPS currently relying on passport relief or limited connection relief: FFSPs currently relying on passport relief or limited connection relief may do so until 31 March 2023. We recommend pausing any further next steps until the outcome of the Federal Government consultation is known.
- Funds management relief: This extension will delay the commencement of funds management relief (ie, relief for some providers of funds management financial services to certain categories of Australian professional investors) until 1 April 2023.
- Foreign AFSL applications currently on foot: ASIC has paused its assessment of foreign AFSL applications lodged by FFSPs pending the outcome of the Federal Government’s announced reforms, unless the relevant FFSP requests that ASIC continue with the assessment of their application.
- FFSPs holding foreign AFSLs: FFSPs currently holding foreign AFSLs may proceed with providing financial services in Australia under that foreign AFSL pending any legislative changes arising out of the Federal Government consultation.
- FFSPs considering entering the Australian market: Passport relief is not available to FFSPs not already relying on passport relief. Limited connection relief is available, otherwise ASIC will consider new applications for individual temporary licensing relief or new AFSL or foreign AFSL applications from FFSPs that cannot rely on the transitional relief.
If you are unsure about what your next steps should be, get in touch with our Financial Services Regulation lawyers to discuss your options.