Australia: ASIC Extends Transitional Relief For Foreign Financial Service Providers

By: Rebecca Mangos and Lisa Lautier

The Australian Investments and Securities Commission (ASIC) announced that it has further extended relief for foreign financial services providers (FFSPs) from the requirement to hold an Australian financial services licence (AFSL) when providing financial services to Australian wholesale clients.

Transitional arrangements for the sufficient equivalence relief and limited connection relief were due to expire on 31 March 2024. The extension means transitional arrangements can continue to 31 March 2025 under ASIC Corporations (Amendment) Instrument 2023/588.

The extension will provide FFSPs with time to move across to an updated regime that has been proposed by the Australian Government. Exposure draft legislation seeks to introduce exemptions for FFSPs to facilitate cross-border financial services. If passed, the proposed legislation will take effect on 1 April 2024. These exemptions include:

Professional investor exemption

FFSPs that provide financial services from outside Australia to professional investors will, subject to eligibility, be exempt from the requirement to hold an AFSL. A “professional investor” adopts the existing definition under the Corporations Act 2001 (Cth), which includes an AFSL holder, a listed entity, trustees of certain superannuation trusts or schemes and an exempt public authority. While a professional investor is a type of wholesale client, the professional investor exemption will not apply more broadly to wholesale clients who are not professional investors.

The new exemption also seeks to clarify what is meant by “outside this jurisdiction”. While the exemption is only available to financial services provided from outside Australia, this does not preclude FFSPs from making infrequent marketing visits to Australia. The exemption specifies certain conditions on the FFSP with respect to “marketing visits”, which will be limited to no more than 28 calendar days each financial year.

Comparable regulator exemption

FFSPs that are foreign companies or partnerships formed outside of Australia that provide financial services to wholesale clients will be exempt from the requirement to hold an AFSL provided the FFSP is authorised, registered or licensed by a comparable regulator to legally provide the same or substantially the same financial service in a comparable jurisdiction. This new exemption is similar to the sufficient equivalence relief and expands the list of applicable regulatory authorities in “comparable” jurisdictions. These jurisdictions include the United States, United Kingdom, Hong Kong, Singapore, Germany, Luxembourg, Sweden, Denmark, France and Canada.

Financial services may be provided from within Australia or the comparable jurisdiction. For example, if the comparable regulator is the Financial Conduct Authority in the UK, the person may provide the financial service from either the UK or from Australia.

Like the sufficient equivalence relief, the FFSP will need to comply with certain conditions in order to rely on the exemption.

In the meantime, ASIC will continue to consider new applications for individual temporary licensing relief from entities that cannot rely on the transitional relief.

Please reach out to us if you would like any advice with respect to relief, transitional arrangements or the proposed legislation.

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