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.

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