Australia - Clarity On ASIC Relief For FFSPs And Foreign AFS Licence.

Legal News & Analysis - Asia Pacific - Australia - Banking & Finance - Regulatory & Compliance

Asia Pacific Legal Updates


6 September, 2019


Australia - Clarity On ASIC Relief For FFSPs And Foreign AFS Licence.


On 3 July 2019, ASIC released Consultation Paper 315 Foreign financial service providers: further consultation (CP 315). CP 315 provides clarity on the licensing relief for foreign financial services providers (FFSPs) wishing to provide financial services in Australia to wholesale clients or professional investors only.


ASIC proposes to provide new funds management relief, repeal the current Limited Connection licensing relief and provides details in its draft RG 176 on the implementation of a foreign Australian financial services license for FFSPs relying on the 'sufficient equivalence' relief (also known as the 'Passporting Exemptions').


Funds Management Relief


This relief will essentially exempt foreign providers from the requirement to hold an Australian financial services licence (AFSL) to provide funds management services to professional investors in Australia. This will be subject to a cap on the scale of the FFSP's funds management services provided to professional investors in Australia and conditions applying to the operation of the relief. Funds management services includes dealing, advising and making markets in offshore funds and management of offshore assets.


ASIC proposes that an FFSP will only have the benefit of this relief if less than 10% of its annual aggregated consolidated gross revenue including the aggregated consolidated gross revenue of entities within its corporate group (for each of the previous and current financial years) is generated from the provision of funds management services in Australia. ASIC reasons that this cap to ensure that such funds management services do not form a substantial part of the FFSP's business. The 10% threshold represents the level of services by reference to the revenue arising from professional investors in Australia that ASIC is comfortable in permitting an FFSP to provide without an AFSL. In determining the revenue derived from the relevant services, ASIC considers that FFSPs should apply their home jurisdiction's accounting practice.


To rely on the relief, an FFSP must be an unregistered foreign company and not already hold an AFSL authorising funds management services.


The effect of this requirement is that the scope of the exemption is quite narrow, as generally all foreign companies who are considered to be carrying on business in Australia must become a registered foreign company.


If the FFSP finds itself too close to exceeding the proposed aggregate revenue cap, it should consider whether it should: 


  • apply for and hold a standard AFSL;
  • apply for and hold a Foreign AFSL (if regulated under sufficient equivalence overseas regulatory regimes);
  • reduce its activities to maintain the benefit of the relief; and
  • limit its activities to that covered by existing statutory exemptions (if applicable).


Limited Connection Exemption – extension dates clarified


ASIC proposes to repeal the Limited Connection licensing relief – see our previous alert on this of September 2018.


The current exemption was due to expire on 30 September 2019 (with a 12 month transition period to 30 September 2020) if ASIC was to proceed with the modified licensing regime. Now, ASIC has confirmed the relief will be extended to 31 March 2020 whilst consulting with stakeholders on the funds management relief and repeal of the 'limited connection' relief and rather, allow an additional 6 month period of transition to 30 September 2020.


Implementation of a Foreign AFSL and 'Passporting Exemptions' extended


ASIC has confirmed that in relation to the Passporting Exemptions, the extension of the relief will be till 31 March 2020. The new Foreign AFSL regime will commence on 1 April 2020.


Those FFSPs who are currently relying on the Passporting Exemption will have a transition period of 24 months from 1 April 2020 to comply with the new requirements of the Foreign AFSL. This transition period will allow for the submission of an application for an AFSL and for ASIC to assess such an application.


The authorisations provided by a Foreign AFSL are expected to be substantially the same as those provided by each relevant Passporting Exemption.


As with the current Passporting Exemptions, the authorisations available to an FFSP will vary by reference to the jurisdiction and regulator of the FFSP. Please refer to Table 2 of draft RG 176 for more information on the authorisations expected to be available.


Process for applying for a Foreign AFSL


For a Foreign AFSL, an applicant must ensure the following:


  • it is eligible to apply for a Foreign AFS licence (i.e. is licensed in a 'sufficiently equivalent jurisdiction' for the relevant financial services);
  • it is registered as a foreign company if so required under the Corporations Act;
  • provide the required 'proof' documents with its application (see below);
  • understand and be able to comply with its obligations as a foreign AFS licensee and with its licence conditions; and
  • lodge its application with the application fee.


The proof documents required for a Foreign AFSL will be substantially less than is required for a standard AFSL. An FFSP applying for a Foreign AFSL will only need to provide an A5 Business Description proof and criminal history and bankruptcy checks for its responsible managers. FFSPs will not be required to provide B1 Organisational Competence and B5 Financial Statements and Financial Resources proofs.


As at the date of this publication, the following jurisdictions are considered 'sufficiently equivalent jurisdictions': 


  • Germany
  • Hong Kong
  • Luxembourg
  • United Kingdom
  • Singapore
  • United States


Note, ASIC is currently not proposing to give AFSL relief to allow FFSPs to provide financial services to professional investors in Australia on a reverse enquiry basis however, ASIC, in CP 315, seeks feedback on this issue.


Baker McKenzie


For further information, please contact: 


Bill Fuggle, Partner, Baker & McKenzie

[email protected]