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12 Months Reprieve For Foreign Financial Services Providers Using AFSL Exemptions – Financial Services



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Today the Australian corporate regulator, ASIC, announced an
extension of 12 months for the transitional arrangements for the
passporting exemptions and limited connection exemption, which will
now expire on 31 March 2024.

BACKGROUND

  • The passporting exemptions and limited connection exemption
    from the need to hold an Australian financial services licence
    (AFSL) that have been used by foreign financial
    services providers (FFSPs) since 2003 are in a
    transition to expiry, due to expire on 31 March 2023.

  • The consultation in relation to the expiry and replacement of
    those exemptions had originally proposed that they would be
    replaced by the ‘foreign AFSL’ regime and the ‘funds
    management exemption’ (see our earlier article of 11 March 2020).

  • In the May 2021 Australian Federal budget, the Treasurer
    announced a further consultation in relation to potentially
    restoring the passporting and limited connection exemptions. That
    consultation led to proposals in relation to alternative exemptions
    for FFSPs, in the form of the ‘comparable regulator
    exemption’ and the ‘professional investor
    exemption’.

  • A bill to introduce the ‘comparable regulator
    exemption’ and the ‘professional investor exemption’
    was introduced into the House of Representatives in February 2022
    (Bill) but lapsed on the calling of the Australian
    federal election, creating uncertainty again for FFSPs (see our
    earlier article of 11 April 2022).

WHAT HAS HAPPENED?

Today ASIC announced an extension of 12 months for the
transitional arrangements for the passporting exemptions and
limited connection exemption, so that they will expire on 31 March
2024, rather than 31 March 2023.

ASIC is also delaying the commencement of the funds management
AFSL exemption (which may be used by FFSPs to provide financial
services from offshore to certain categories of Australian
professional investors) by 12 months, to 1 April 2024.

ASIC has effected these changes by issuing ASIC Corporations (Amendment) Instrument
2022/623
.

WHAT HAPPENS NEXT?

Until the passporting exemptions and limited connection
exemption expire on 31 March 2024:

  • ASIC and Treasury are expected to consult on the lapsed Bill,
    the future for FFSP exemptions and the use of the foreign AFSL
    regime and funds management exemption;

  • ASIC will continue to consider new applications for individual
    temporary licensing relief, or new standard or foreign AFS licence
    applications, from entities that cannot rely on the transitional
    relief; and

  • FFSPs that have been granted a ‘foreign AFSL’ will be
    able to continue to operate under that licence.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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