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30 Nov 2023
Insight
Australia
On 30 November 2023, a new bill to introduce new exemptions from holding an Australian financial service licence (AFSL) for foreign financial service providers (FFSPs) was tabled in the House of Representatives. The new bill is substantially similar to the exposure draft bill released in August 2023 but some important improvements have been made to it. If passed, it will provide much needed certainty for FFSPs and their Australian clients.
Background
- Treasury consulted on exposure draft legislation (Exposure Draft Bill) to implement the new FFSP AFSL exemptions in August 2023 (see our earlier article of 8 August 2023).
- That Exposure Draft Bill sought to introduce, with effect from 31 March 2024:
- a comparable regulator exemption;
- a professional investor exemption;
- a market maker exemption; and
- an exemption from the fit‑and‑proper person assessment to fast‑track the licensing process for FFSPs authorised to provide financial services in a comparable regulatory regime.
- On 30 November 2023, a new bill to introduce new exemptions from holding an AFSL for FFSPs was tabled in the House of Representatives, in schedule 7 to the Treasury Laws Amendment (Better Targeted Superannuation Concessions) Imposition Bill (Bill). The draft Bill and its explanatory memorandum are available here.
- The Bill is substantially similar to the Exposure Draft Bill but there are some important improvements that have been made to it and if passed it will provide much needed certainty for FFSPs and their Australian clients.
What has changed?
The key changes between the Bill and the Exposure Draft Bill are:
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Issue |
Change |
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1 |
Commencement |
The changes and the new AFSL FFSP exemptions take effect from 1 April 2025 (not 1 April 2024). |
|
2 |
Condition to provide services efficiently, honestly and fairly |
The condition that the FFSP using any of the three exemptions must do all things necessary to ensure that the financial services are provided efficiently, honestly and fairly has been limited to apply only to FFSPs whose financial services business is carried on ‘predominantly in Australia’. In practice this condition will likely only apply to the comparable regulator exemption. |
|
3 |
Comparable regulator exemption - location of representatives |
The comparable regulator exemption limitation in the Exposure Draft Bill that the financial services must be provided from the home jurisdiction of the FFSP or in Australia has been removed. This means that the financial services can be provided by the FFSP from another jurisdiction (for example, a jurisdiction which is geographically closer to Australia). |
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4 |
Comparable regulator exemption – oversight and training of representative |
The comparable regulator exemption obligations in the Exposure Draft Bill that the FFSP must:
has been removed. |
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5 |
Submission to Australian jurisdiction |
The condition that FFSPs using any of the three exemptions must submit to the non-exclusive jurisdiction of the Australian courts in respect of legal proceedings relating to the provision of the financial services carried on under one of the exemptions has been narrowed. Submission to jurisdiction is now limited to proceedings that are brought in a Court by ASIC and another Commonwealth authority. |
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6 |
Professional investor exemption marketing trips |
When calculating the permitted 28 calendar days per year of marketing trips to Australia under the professional investor exemption, days when the representatives do not meet with any clients (eg holiday days added to a marketing visit) will not be counted. |
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7 |
Market traded products limitation for the professional investor exemption |
The limitation in the Exposure Draft Bill in relation to the scope of financial services covered by the professional investor exemption, to exclude dealings in certain market traded products has been removed. |
|
8 |
Breach reporting |
The Bill has extended the long stop date for breach reporting under the exemptions from 15 business days to 30 business days (after becoming aware of, or when the FFSP would reasonably be expected to have become aware of, the reportable breach). This is longer than the 30 calendar day long stop date that applies to breach reporting for AFSL holders. |
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Legal Notice
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2023