13 May 2021

Budget 2021-2022: Foreign Financial Services pause on changes to regulation

The Government's announcement of the 2021-2022 Australian Federal Budget on 11 May 2021 has indicated that the new foreign licensing framework that was proposed to commence on 1 April 2022 (as we've previously described when the regime was unveiled and in response to FAQs and updates to the timetable over time), is subject to further consultation, with the suggestion that the previous model may continue to apply.

In an effort to reduce duplicate regulatory requirements in respect to Foreign Financial Service Providers (FFSPs) which deal with wholesale clients and professional investors, the Government has indicated that it will provide relief to FFSPs from the requirement to hold an Australian Financial Service Licence. In doing so, it will consult on options to:

  • restore previously well-established regulatory relief for FFSPs who are licensed and regulated in jurisdictions with comparable financial service rules and obligations – this suggests that the "Sufficient Equivalence Relief" (as defined below) may continue to be available to FFSPs, indefinitely.In this regard, we note that what ASIC considers to be a "sufficiently equivalent jurisdiction" was expanded under the new foreign licensing regime (for full list, please see "Eligible Jurisdictions" defined below).It is unclear at this stage if the Government's consultations will include providing new relief instruments for these additional jurisdictions that do not already have relief under the existing Sufficient Equivalence Relief; and
  • restore previously well-established regulatory relief for FFSPs who have limited connection to Australia – this suggests that the "Limited Connection Relief" (as defined below) to be available to FFSPs, indefinitely.

In an effort to reduce barriers for FFSPs who are entering the Australian market and who wish to establish more permanent operations in Australia, the Government has also indicated that it will consult on options to create a fast-track licensing process for FFSPs. The proposed fast-tracking is also intended to shorten application timeframes.

Definitions

Sufficient Equivalence Relief

This refers to the following relief instruments:

  • [CO 03/1099] UK regulated financial service providers;
  • [CO 03/1100] US SEC regulated financial service providers;
  • [CO 03/1101] US Federal Reserve and OCC regulated financial service providers;
  • [CO 03/1102] Singapore MAS regulated financial service providers;
  • [CO 03/1103] Hong Kong SFC regulated financial service providers;
  • [CO 04/829] US CFTC regulated entities;
  • [CO 04/1313] German BaFin regulated financial service providers; and
  • ASIC Corporations (CSSF-Regulated Financial Services Providers) Instrument 2016/1109

Limited Connection Relief

This refers to the ASIC Corporations (Foreign Financial Service Providers – Limited Connection) Instrument 2017/182 

Eligible Jurisdiction

This refers to the following jurisdictions that were considered as having "sufficient equivalence" to Australia's regulatory jurisdiction, for the purposes of the new foreign licensing regime:

  • US SEC regulated financial service providers;
  • US Federal Reserve and OCC regulated financial service providers;
  • US CFTC regulated financial services providers;
  • Singapore MAS regulated financial service providers;
  • Hong Kong SFC regulated financial service providers;
  • German BaFin regulated financial service providers;
  • Luxembourg CSSF regulated financial services providers;
  • UK regulated financial service providers;
  • Danish FSA regulated financial service providers;
  • Swedish FI regulated financial service providers;
  • French AMF regulated financial service provides;
  • French ACPR regulated financial service providers; and
  • Ontario OSC regulated financial service providers.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.