Up to now, foreign regulated investment managers were able to rely on a relief issued under a particular Class Order, that provides for an exemption to hold an Australian Financial Services (AFS) Licence. On 21 September 2018, the Australian Securities and Investments Commission (ASIC) issued an announcement under Instrument 2018/807, that the existing relief available to certain foreign financial services providers (FFSPs) is to be extended for an additional 12month period until 30 September 2019.
On 1 June 2018, ASIC announced that it's proposing to implement a modified form of the AFS Licence for FFSPs in Australia, being introduced as the Foreign AFS Licence. This will be a significant change to the existing regulatory regime which currently provides many FFSPs with relief from the requirement to hold an AFS Licence when providing financial services to wholesale clients in Australia.
It's not yet clear, but most likely a grace period (of about 12 months) will apply after 30 September 2019 for existing FFSPs who have successfully applied for a relief under a certain Class Order before 30 September 2019. This will give FSSPs the time to find a solution for their current situation. Eventually FFSPs will no longer be able to rely on the relief and will need to start applying for a Foreign AFS Licence or other solution (for instance, partnering with an Australian investment manager who already has an AFS License), or simply cease activities in Australia and move out.
Foreign investment managers should be aware that the costs for applying for a Foreign AFS Licence and ongoing compliance with the Foreign AFS Licence terms and conditions will increase their overall operational costs if marketing to Australian wholesale investors is still part of their strategy. The new measures may impact those investment managers who have limited exposure to Australian wholesale investors and will need to reconsider, if under the new regime, whether it would still be viable to be active in Australia.
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.