Australia: FFSP Regime Finally Announced – Good News for Offshore Managers
By: Jim Bulling and Felix Charlesworth
FFSP regime finally announced – good news for offshore managers
On 17 February 2022, the Government introduced the final version of the Foreign Financial Service Provider (FFSP) regulatory regime into Parliament.
The new laws outline three ways in which FFSPs will either be exempt from the requirement to hold an Australian Financial Services Licence (AFSL), or be able to fast track the licencing process. These exemptions will commence on 1 April 2023, to coincide with the expiry of the transitional relief.
Professional Investor Exemption
This expands the availability of the existing professional investor exemption by removing limits on the types of financial products or services that may be provided.
To operate under this exemption, a person or entity must:
- Provide financial services only to professional investors;
- Reasonably believe providing the same financial service would not contravene any law applying in their principal place of business; and
- Provide services from, and have a head office and principal place of business, outside Australia.
Comparable Regulator Exemption
This expands and reforms the existing “class order” relief, providing an exemption from the requirement to hold an AFSL where an entity formed outside Australia is regulated for the same services in a “comparable jurisdiction”. It is anticipated those jurisdictions will include the United States, Singapore, Hong Kong, Germany, United Kingdom, Sweden, France, Denmark, and Canada.
To claim the CR Exemption, an entity must:
- be a foreign company or partnership formed outside Australia;
- service only wholesale clients;
- obtain and retain the necessary permissions required to legally provide the same financial services in a foreign jurisdiction by a regulator deemed “comparable” by the Minister; and
- provide the financial service from Australia or the comparable jurisdiction.
Fit and Proper Person Test Exemption
This does not provide an exemption from the requirement to hold an AFSL. Rather, it provides a “fast tracked” AFSL application process by releasing eligible FFSPs from the requirement to satisfy the fit and proper person test.
This exemption applies in conjunction with the previously implemented, then paused, Foreign AFSL regime. FFSPs will only be able to rely on this exemption where their Foreign AFSL application is lodged on or after 1 April 2023.
Conditions for Reliance on Exemptions
Each exemption has certain compliance requirements which an FFSP must meet in order to rely on the exemption, including notifying ASIC of reliance. The Bill clarifies that ASIC can be notified 15 business days before or after the commencement of the relevant financial service in Australia.
The proposed legislation has entered Parliament for consultation and at this stage it looks unlikely that any changes will be made before the Bill is passed into law.