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

In brief

The Australian Securities and Investments Commission (ASIC) has, again, extended the transitional relief period for Foreign Financial Services Providers (FFSPs) for a further 12 months to 31 March 2024, through the introduction of the ASIC Corporations (Amendment) Instrument 2022/623 (“Amendment Instrument“) on 28 July 2022.

ASIC has stated the Amendment Instrument was introduced to provide certainty for the industry given the lapsing of the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 (“Bill“), discussed in more detail in our earlier alert available here.

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Contents

1. In more detail
2. Current and future options for FFSPs
3. Amendments to ASIC Instruments
4. Timeline of transitional relief period
5. Next steps

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To the extent that the continued extensions of the transitional relief have become confusing, an outline of the timeline is set out in brief below and in the Explanatory Statement.  

In summary, the transition period has now been extended through to 31 March 2024 for FFSPs relying on:

• the wholesale client limited connection exemption; or
• the “sufficient equivalence” passporting of their offshore licence into Australia (only if already relying on this option as at 31 March 2020).

The Amendment Instrument also further postpones commencement of the proposed “foreign fund manager” relief until 1 April 2024.

The lapsing of the Bill suggests it is unlikely that we will see a further amended limited connection/professional investor exemption or a fast-track licensing process for foreign Australian financial services licences (“foreign AFSL“).

At this stage, the extended transition period doesn’t assist new entrants access to the Australian market, noting ASIC has stated that it will instead give bespoke relief on application to new applicants (presumably on the same terms as the passporting class order exemptions provided they are regulated by one of the approved regulators).

It is still open to apply for a foreign AFSL.  To follow this route, the process should be started sooner rather than later to allow time for processing of the licence application.

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

1. if the FFSP does not otherwise carry on business in Australia – use the extended sun-setting of the limited connection class order to work with wholesale Australian clients until 31 March 2024;
2. if the FFSP carries on business in Australia, and relied on the passporting exemption as at 31 March 2020 – use the extended sun-setting of the passporting class orders to work with wholesale Australian clients until 31 March 2024; and
3. if the FFSP carries on business in Australia, and DID NOT rely on the passporting exemption as at 31 March 2020 – seek bespoke relief to rely on similar conditions to the passporting class orders to work with wholesale Australian clients until 31 March 2024 and/or seek a foreign AFSL.

And from 1 April 2024:

1. if the FFSP can work within the constraints of the proposed “foreign fund manager” exemption – rely on that exemption from 1 April 2024;
2. if the FFSP needs broader authorisation from 1 April 2024 – seek a foreign AFSL (best to start that process sooner rather than later); and
3. otherwise rely on alternative financial services licencing exemptions – (for example, limiting activities to reverse enquiry or acting on behalf of a licensee as an authorised representative).

The Amendment Instrument amended the following Instruments:

• ASIC Corporations (Repeal and Transitional) Instrument 2016/396;
• ASIC Corporations (Foreign Financial Services Providers—Limited Connection) Instrument 2017/182; and
• ASIC Corporations (CSSF-Regulated Financial Services Providers) Instrument 2016/1109.

Together, these have the effect of providing transitional relief for a range of FFSPs relying on the existing exemption framework from the requirement to hold an Australian Financial Services Licence, pending the outcome of potentially even further consultation about the regulation of FFSPs.

The Amendment Instrument also delays the commencement of licensing relief for some providers of funds management financial services until 1 April 2024 under the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199.

• September 2016: ASIC introduces the ASIC Corporations (Repeal and Transitional) Instrument 2016/396.
• November 2016: ASIC introduces the ASIC Corporations (CSSF-Regulated Financial Services Providers) Instrument 2016/1109.
• March 2017: ASIC introduces the (Foreign Financial Services Providers—Limited Connection) Instrument 2017/18.
• 2018 and 2019: ASIC extends the transitional relief period granted under the above listed Instruments. 
• March 2020: ASIC extends the transitional relief period for a further 2 years until 31 March 2022 through the amendment of the ASIC Corporations (Repeal and Transitional) Instrument 2016/396 and the (Foreign Financial Services Providers—Limited Connection) Instrument 2017/18.
• March 2020: ASIC issues the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199 which is set to commence 1 April 2022 (this was delayed to 1 April 2023).
• May 2021: The former Australian Government announces it will consult on regulatory relief for FFSPs.
• June 2021: ASIC extends the transitional relief period for a further 12 months until 31 March 2023 through the amendment of the ASIC Corporations (Repeal and Transitional) Instrument 2016/396 and the (Foreign Financial Services Providers—Limited Connection) Instrument 2017/18.
• February 2022: The Government introduces the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 (which lapsed when the Government changed on 11 April 2022).
• July 2022: ASIC extends the transitional relief period for a further 12 months until 31 March 2024 through the introduction of the ASIC Corporations (Amendment) Instrument 2022/623.

FFSPs should continue to review the extent to which they can continue to rely on the current exemption regime and whether they should begin or restart preparation for a licence application. It is unclear whether the current Government intends to re-introduce the Bill however we will provide details of any future developments regarding FFSPs as they occur.

If you need assistance in assessing the options that are available to you, please contact us.