ASIC officially extends FFSP exemptions for another year

What you need to know 

• The Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022, which was introduced to Parliament earlier this year, lapsed as a result of the Federal Election in May.  That bill proposed new licensing exemptions for services provided to professional investors and for entities regulated by a comparable regulator.  There has not been any announcement as to whether the bill would be re-introduced to the new Parliament.
• ASIC has released the ASIC Corporations (Amendment) Instrument 2022/623, which extends existing licensing relief for FFSPs (including the sufficient equivalence exemption and limited connection exemption) for an additional year until 31 March 2024.  It also delays the commencement of the new funds management exemption to 1 April 2024.
• We understand that ASIC and Treasury are currently consulting with stakeholders in relation to the potential exemptions for FFSP going forward.

What you need to do

• Consider the effect of the extension on your financial service activities.
• Keep an eye out for further consultation from ASIC and Treasury which will likely provide more clarity on in the coming months.

Background

On 28 July 2022, the Australian Securities and Investments Commission (ASIC) registered the ASIC Corporations (Amendment) Instrument 2022/623 (the Instrument). The purpose of the instrument is to extend the operation of relief for certain foreign financial service providers (FFSPs) from the obligation to hold an Australian financial services license (AFSL) made under various ASIC instruments which were set to expire on 31 March 2023 for another year.  These exemptions include the sufficient equivalence exemption (for foreign entities regulated in certain overseas jurisdictions) and the limited connection exemption (for foreign entities which do not carry on a business in Australia in the ordinary course).  These exemptions are now therefore available until 31 March 2024.  

As a result of the extension, the commencement of the funds management exemption is also deferred to 1 April 2024. 

The instrument amends ASIC Corporations (Repeal and Transitional) Instrument 2016/396, the ASIC Corporations (CSSF-Regulated Financial Services Providers) Instrument 2016/1109, the ASIC Corporations (Foreign Financial Services Providers—Limited Connection) Instrument 2017/182 and the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199 (the Principal Instruments). 

In May 2021, the former Government announced it would consult on options for regulatory relief for FFSPs who are licensed and regulated in jurisdictions with comparable financial services rules and obligations. Following consultation in February 2022, the Treasury Laws Amendment (Streamlining and Improving Economic Outcomes for Australians) Bill 2022 (the Bill) was introduced. However, with the dissolution of the houses of Parliament, the Bill lapsed on 11 April 2022. 

It is understood that ASIC and Treasury are currently conducting some soft soundings with various stakeholders with respect to the future of the lapsed Bill and the new licensing exemptions it sought to introduce.  

There is likely to be a further formal consultation in the next few months, and it is possible that additional obligations may be imposed under the updated Bill which may mirror some general obligations of a licensee.

The purpose behind the Instrument is to restore certainty for the industry in this space, and ensure that FFSPs have sufficient time to prepare for the outcome of any further consultation of ASIC and Treasury.

Authors: Jonathan Gordon, Partner; Corey McHattan, Partner; Nicky Thiyavutikan, Senior Associate and Conor Tarpey, Lawyer.