Three ways Foreign Financial Service Providers can respond to Australia’s new licensing regime

From 31 March 2022, Foreign Financial Services Providers (FFSPs) will need to transition to the new Australian licensing regime. After this date, the old Class Order exemptions from licensing, which had been granted for many years by the Australian Securities and Investments Commission (ASIC) to FFSPs allowing the provision of investment management services to wholesale and institutional Australian investors, will no longer be valid.

Following this new regime, FFSPs will have the following three options available to them, should they continue to provide financial services to Australian wholesale and institutional investors:

Option 1: Apply for their own Foreign Australian Financial Services License (Foreign AFSL)

Option 2: Arrange for proper authorisation(s) through a Corporate Authorised Representative (CAR) arrangement with an existing AFSL holder

Option 3: Apply for funds management relief (provided they are eligible, and limitations are acceptable)

Here’s a detailed breakdown of each option for consideration:

Option 1 – Foreign AFSL

The eligibility for applying for a Foreign AFSL depends on whether the FFSP is already subject to one of the equivalent foreign regulatory regimes that Australia recognises. In addition, the financial services the FFSP intends to provide to Australian wholesale clients must be within the scope of services specified for that regulatory regime. There is a predefined list of countries that qualify, including Germany, Hong Kong, Singapore, USA and the United Kingdom to name a few.

How can we help?

Through Intertrust Group’s collaboration with a network of independent external legal advisors, we can assist you with this option and look at other (onshore) structuring needs you may need.

Option 2 – Authorisation by an AFSL holder

This option is the quickest route into Australia if applying for a Foreign AFSL is not an option, or if timing does not allow for the Foreign AFSL route in the first instance. When properly structured, this arrangement permits an FFSP to conduct similar activities in Australia to those that they conduct in their home jurisdiction. Depending on the actual authorisations provided, this may include investment management activities through an investment management agreement, while also marketing of offshore fund products.

Note that with this option, the AFSL holder will need to be involved to a certain degree in the investment management business of the FFSP because the AFSL holder will ultimately be responsible for any authorised activities under its license.

How can we help?

If you are looking to set up an onshore (Australian) vehicle or feeder and must be AFSL compliant in order to undertake certain investment management or fund marketing activities, then our experts at Intertrust Group can assist you. Intertrust Group holds a wholesale AFSL in Australia and can provide necessary authorisations where Intertrust Group is also providing for trustee or other services in relation to an onshore (Australian) vehicle or feeder.

Option 3 – Funds Management Relief

If the FFSP is only involved in limited investment management activities in Australia, and the FFSP does not have a physical presence in the country, then this third option may be best. A good example is where a FFSP has a handful of Australian investors which they service from offshore, but no dedicated employees in Australia. Note with this option only certain activities may be undertaken with a limited category of professional investors, also referred to as an ‘eligible Australian user’; this includes superannuation trustees, licensed trustees of wholesale funds and responsible entities of registered managed investment schemes.

Should you be eligible for the funds management relief option, then you will be required to provide ASIC with a written confirmation of certain matters and appoint a local agent who will receive notices and respond to requests for relevant information about activities involving investors in Australia.

How can we help?

Intertrust Group’s Australia office provides a wide variety of Corporate Services, and local ASIC agent services is part of that offering. Together with an external legal advisor advising on the eligibility aspects, we can assist with any ongoing support service such as being an appointed local agent.

Contacts

If you would like further information, please feel free to contact our team in Australia.