Financial Services Providers (FSPs) who have foreign registration (i.e. by the Financial Conduct Authority in the UK or Financial Services Provider Register in New Zealand) face minimal barriers to entry when providing financial services to Australian Wholesale clients.
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ASIC encourages Foreign FSPs, which are regulated by certain overseas regulators, to enter the Australian market and provide financial services to Australian wholesale clients by applying for the relief from obtaining an Australian Financial Services Licence (AFSL) which is currently available to them.
Presently, ASIC Regulatory Guide 176 (RG176) provides guidance to Foreign FSPs who wish to provide financial services to Australian Wholesale clients. RG176 includes the relevant documentation and procedures the Foreign FSP must provide and rely on in order to satisfy ASIC’s requirements for registration. ASIC has developed two types of relief avenues for Foreign FSPs:
- Class Orders; and
- Individual Relief.
FSPs regulated in the United Kingdom, United States, Singapore, Hong Kong, Germany and Luxembourg all have avenues available to them to provide financial services to Australian Wholesale clients without the need for an AFSL, assuming they meet the requirements of the relevant Class Order.
Back in March 2015, ASIC provided further information and clarified the documentation required to be provided by Foreign FSPs in a Media Release entitled 15-051MR ASIC facilitates foreign financial services providers applying for exemptions.
Currently the following Class Orders are in place:
- UK FSA regulated FSPs - Class Order [CO 03/1099] and [SCO 13/284];
- US SEC regulated FSPs - Class Order [CO 03/1100] and [SCO 10/737];
- US Fed Reserve and OCC regulated FSPs - Class Order [CO 03/1101] and [SCO 03/1101];
- Singapore MAS regulated FSPs - Class Order [CO 03/1102] and [SCO 03/1102];
- HK SFC regulated FSPs - Class Order [CO 03/1103] and [SCO 03/1103];
- US CFTC regulated FSPs - Class Order [CO 04/829] and [SCO 10/737]; and
- German BaFin regulated FSPs - Class Order [CO 04/1313] and [SCO 04/1313].
In September 2016, the above Class Orders were extended by a period of two years to continue to allow Foreign FSPs to provide financial services to wholesale clients. These Class Orders were due to expire between 1 October 2016 and 1 April 2017. The relief now comes under ASIC Corporations (Repeal and Transitional) Instrument 2016/396.
Exemptions Given
Luxembourg regulated FSPs have been issued an exemption to provide financial services to wholesale clients under the ASIC Corporations (CSSF-Regulated Financial Services Providers) Instrument 2016/1109 (Instrument 2016/1109) (Note, prior to 2015 legislative instruments were referred to as Class Orders).
According to a recent ASIC release in November, entitled 16-401MR Relief for foreign financial service providers from Luxembourg, the regulator extended its relief for Fund Managers regulated in Luxemburg when providing financial services to Australian Wholesale Clients. The relief will continue to apply until 28 September 2018.
Instrument 2016/1109 eliminates the requirement to hold an AFSL for Foreign FSPs who are providing the following financial services to Australian clients:
- providing financial product advice;
- dealing in a financial product;
- making a market for a financial product; and
- providing a custodial or depository service;
in respect of the following financial products:
- eligible deposit products;
- derivatives;
- foreign Exchange contracts;
- securities;
- debentures, stocks or bonds issued by a government;
- managed investment products; and
- interests in a managed investment scheme that is not required to be registered under Chapter 5C of the Corporations Act 2001.
In order to rely on Instrument 2016/1109, a Luxembourg FSP must:
- provide ASIC with appropriate evidence that it satisfies the definition of a firm regulated by the Commission de Surveillance du Secteur Financier (the Commission for the Supervision of the Financial Sector) of Luxembourg (refer to RG176);
- provide ASIC with written notice that it will provide financial services to Australian wholesale clients with reliance on the instrument;
- written consent to the disclosure by the Foreign FSP to ASIC and ASIC to the Foreign FSP of any information or document that the Foreign FSP or ASIC has that relates to the provider; and
- provide clients with written disclosure that the Foreign FSP is relying on Instrument 2016/1109 to provide financial services to Australian wholesale clients.
Interestingly, ASIC is seeking to repeal the original Class Order 03/824 – Licensing relief for financial service providers with limited connection to Australia dealing with wholesale clients (CO 03/824). CO 03/824 first provided relief for Foreign FSPs to provide financial services to Australian wholesale clients.
ASIC’s reasoning behind the appeal is that CO 03/824 is no longer relevant as the relief available to Foreign FSPs has been documented in the Corporations Regulations 2001. ASIC has released Consultation Paper 268 entitled Licensing relief for foreign financial services providers with a limited connection to Australia providing further detail surrounding the proposed repeal.
Between October 2016 and December 2017, ASIC will undertake a thorough review of the avenue of relief available to Foreign FSPs and will provide a further consultation paper on the issue in January 2018.
