ASIC are reviewing the existing Australian Financial Services Licence (AFSL) requirements for offshore providers of financial services in Australia, known as Foreign Financial Services Providers (FFSP).
The existing rules for FFSPs required that they meet one of two options in order to rely on exemptions in providing regulated services in Australia (regulated services being those that would ordinarily require an AFSL). The two existing options are summarised below:
1. Adequate equivalence and/or limited connection
Equivalence is the basis for an exemption most often provided to businesses in other common law jurisdictions with similar regulatory intent and requirements to those in Australia – in particular, those countries with existing regulatory cooperation agreements with ASIC including Germany, Singapore, Hong Kong, United States and United Kingdom.
A limited or incidental level of involvement with, or reliance on, Australian customers (wholesale only) is another avenue of exemption under the current framework.
As it stands, both are open to interpretation by both the regulator and the regulated and in some circumstances, this can lead to uncertainty.
2. ASIC Consultations
Consultation papers 301 (CP 301) and 315 (CP 315) both seek to explore the merits of change to the current regime. Both set the scene for an alternative licensing regime consistent with AFSL, for FFSP.
At the time of writing no new regulatory guidance has been published to replace Regulatory Guide 176 (RG 176) or information sheet 157 (INFO 157). However, CP315 strongly indicates that both will be updated to reflect ASIC objectives and the outcomes of the consultation process.
ASIC are clear that they will remove INFO 157 and amend RG 176. FFSPs who rely on these exemptions should be seeking advice on the implications of applying for an AFSL.
It may also be a reasonable expectation that the regulatory certainty afforded by a clear process may increase the number of businesses wanting to expand to Australia.
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