The Australian Government is seeking stakeholder views on the first tranche of exposure draft legislation to provide regulatory relief for Foreign Financial Service Providers (FFSPs).

The object of the Bill is to reduce barriers of entry and encourage greater engagement by foreign financial service providers in the Australian market. As a result, this will allow Australian professional and wholesale investors to diversify their investment opportunities and attract additional investment and liquidity to Australian markets.

The Bill aims to achieve this object by providing for three licensing exemptions for foreign financial service providers.

• Professional investor exemption

The new professional investor exemption provides an exemption from the requirement to hold an Australian financial services licence for persons that provide financial services from outside Australia to professional investors. This exemption will replace the existing professional investor exemption.

The professional investor exemption is only available in the following circumstances:

• the financial service is provided only to professional investors;
• the person provides the financial service from a place outside Australia;
• the person’s head office and principal place of business are located at one or more places outside Australia; and
• the person reasonably believes that the provision of the financial service does not contravene any laws that apply in the person’s principal place of business, head office or the place from where the financial services are provided.

The Bill also provides that regulations may prescribe particular kinds of financial services or products and professional investors in relation to which the professional investor exemption does not apply.

A person that uses the professional investor exemption to provide financial services to professional investors must comply with certain conditions. This includes (but is not limited to) notifying ASIC of the person’s intention to rely on the exemption, submitting to the non- exclusive jurisdiction of Australian courts and complying with reasonable requests for assistance from ASIC.

If a person fails to comply with a condition, ASIC may cancel the person’s exemption (after giving the person a notice of the proposed decision and an opportunity to appear at a hearing or make a submission), impose additional conditions on the person’s use of the exemption, or apply to the court for a civil penalty and pecuniary penalty order.

• Comparable regulator exemption

The new comparable regulator exemption provides an exemption from the requirement to hold an Australian financial services licence for foreign companies that provide financial services to wholesale clients.

The comparable regulator exemption is only available where the foreign company is authorised, registered or licensed to provide the same financial service by a regulator in a foreign jurisdiction and the Minister has determined that the regulator administers a comparable regulatory regime.

A foreign company that uses this exemption to provide financial services to wholesale clients must comply with certain conditions. These are mostly the same as the conditions applicable to the professional investor exemption, but also include consenting to information sharing between ASIC and the foreign company’s home regulator; notifying ASIC of any significant enforcement or disciplinary actions taken against the foreign company in any place outside Australia; appointing an agent in Australia; and maintaining sufficient oversight over its representatives.

As with the professional investor exemption, a failure to comply with the conditions may result in ASIC cancelling the foreign company’s exemption, imposing additional conditions, or applying to the court for a civil penalty and pecuniary penalty order being sought.

• Fit and proper person test exemption

Foreign companies that are authorised, registered or licensed by a comparable regulator and only provide financial services to wholesale clients are exempt from the requirement to satisfy the fit and proper test requirement when applying for an Australian financial services licence under section 913A of the Corporations Act.

The fit and proper test exemption also applies when an eligible foreign company makes an application to impose, vary or revoke a condition on an existing Australian financial services licence under section 914B of the Corporations Act.

The Bill provides that the Minister may, by legislative instrument, determine regulators that administer comparable regulatory regimes. The comparable regulators determined by the Minister are applicable to both the comparable regulator exemption and the fit and proper person test exemption.

Interested parties can submit responses to the consultation up until 12 January 2022.