Time to take action is now – the new FFSP licensing regime is here!

The new regime requires for most financial services activities carried out by foreign financial service providers, to be authorised under an Australian Financial Services Licence (AFS Licence). If a FFSP is not currently operating under the transitional arrangements, which end on 31 March 2022, the FFSP must now be authorised under an AFS Licence to conduct financial services in Australia.

 So, in short what does this mean for FFSPs which includes, foreign fund managers, foreign investment managers, foreign asset managers, offshore investment vehicles, foreign banks and foreign brokers, who wish to conduct financial services activities in Australia? There are four options available: 

• Appointment as a Corporate Authorised Representative under an AFS Licence through an AFS Licensee such as Polar 993. 
• If eligible, apply for and obtain a Foreign AFS Licence. 
• Seek to rely on the narrow exemption of “Funds Management Relief” which is available only for activities for “Professional Investors”. 
• If none of the above are viable options, the FFSP must hold a standard full AFS Licence. 

HOW CAN POLAR 993 ASSIST?

 Polar 993 may appoint foreign financial services providers (FFSPs) under its licence to provide financial services in Australia, to wholesale clients, by way of a Corporate Authorised Representative appointment. A corporate authorised representative appointment allows the authorised FFSP to conduct some or all of the financial services that Polar 993 is authorised to provide under its AFS Licence. 

Benefits that an FFSP may have by becoming a Corporate Authorised Representative (CAR) under the AFS License of Polar 993 include: 

• Allowing the FFSP to operate in Australia without having the necessity for itself to become directly registered and regulated by the Australian Securities and Investments Commission (ASIC). 
• An appointment as a Corporate Authorised Representative can be completed quickly. 
• Ensuring that the FFSP is at all times compliant with the Australian financial services regime. 
• Can be a transitional solution whilst the FFSP applies for its own Foreign AFS Licence or a standard full AFS Licence. 

WHAT IS A FOREIGN AFS LICENCE?

A foreign AFS License is a modified Australian Financial Services License that is available to off-shore companies who are authorised in a sufficiently equivalent overseas regulatory regime to provide financial services. The core premise of the regime is that to be eligible to apply for a foreign AFS Licence the FFSP must hold the relevant authorisations in the overseas jurisdiction. Currently there are 13 jurisdictions which have been approved. A foreign AFS Licensee will be able to provide equivalent financial services to wholesale clients in Australia. FFSPs that are not regulated by one of the 13 jurisdictions will not be able to apply for a foreign AFS Licence.

Additionally, a foreign AFS Licensee will be exempted from certain sections and requirements of the standard full AFS Licence regime on the basis that the foreign AFS Licensee is already in their home jurisdiction subject to sufficiently equivalent regulatory requirements and further that they are subject to supervision and when required enforcement action by the overseas regulator. Such exemptions from the standard full AFS Licence include the obligation to have adequate resources, the obligation to maintain competence to provide the financial services and obligations to ensure that representatives are appropriately trained. 

A foreign AFS Licensee is still subject to all other applicable provisions under the Corporations Act which includes: 

• The obligation to provide financial services efficiently, honestly and fairly. 
• The obligation to have in place adequate arrangements for the management of conflicts of interests. 
• The obligation to comply with applicable financial services laws. 
• The obligation to take reasonable steps to ensure that representatives comply with the applicable financial services laws. 
• The requirement to have adequate risk management systems. 

In essence, other than the exempted provisions, a foreign AFS licensee is subject to essentially the same obligations as a standard full AFS licensee, and whilst the application process has been somewhat simplified, it remains complex and time consuming. 

FUNDS MANAGEMENT RELIEF

The Funds Management Relief is a new regime which may apply to Foreign Financial Service Providers (FFSPs) in limited and narrow circumstances. FFSPs that are only carrying on a financial services business in Australia because they are engaging in “inducing conduct” in relation to the provision of “funds management financial services” may be able to rely on the Funds Management Relief. However, such relief only extends to a certain type of “professional investors” which has a materially narrower definition than that of a wholesale client as defined by the Corporations Act (Cth). 

ASIC has specifically sort to ensure that the scope of “eligible Australian professional investors” to which FFSPs are able to engage in “inducing conduct”, is limited and restrictive. Further a FFSP who is relying on the Funds Management Relief is not permitted to have a place of business in Australia. The FFSP is permitted to visit Australia to meet with its clients, however, if the FFSP is carrying on a financial services business in Australia, other than because of “inducing conduct”, the FFSP will not be eligible for the Funds Management Relief.

STANDARD FULL AFS LICENCE

Any FFSP who is not eligible to be licenced as a Foreign AFS Licensee or is not eligible for the Funds Management Relief is able to apply for a standard full AFS Licence. This will require the FFSP preparing and lodging all of the core proofs required by ASIC and for the FFSP to then comply with all of the obligations of an AFS Licensee. 

CONCLUSION

All FFSPs including, foreign fund managers, foreign investment managers, foreign asset managers, offshore investment vehicles, foreign banks and foreign brokers, need to give consideration to their current and ongoing licensing arrangements in Australia. FFSPs in order to carry out financial services in Australia need to have the appropriate licencing. If an FFSP does not fall under the narrow Funds Management Relief described above, the FFSP must utilise one of the alternative licensing options. It is important to note that the scope of FFSPs includes financial product issuers, financial product intermediaries, product advisers and financial product distributors. 

Polar 993 is able to appoint FFSPs under Polar 993’s AFS license as a Corporate Authorised Representative, which will then allow the FFSP to provide financial services in Australia to wholesale clients.