Banking
What does FSR mean for the banking industry?
Updated as at 11 March 2004.
Retail client or wholesale client
The type of regulation that is imposed depends on whether the bank is dealing with a retail or wholesale client. A client is retail unless the price or value of the service exceeds a certain amount, it's a business with a certain number of employees, it has a minimum net worth or income or it is a professional investor.
Everyone is a retail client unless they're a wholesale client and the onus is on the banking institution to prove their client is a wholesale client.
Extra work is required to monitor the distinction at the margins.
Territorial reach of FSR
The legislation covers markets operated in Australia and includes markets operated by a body corporate registered (incorporated) in Australia.
The pre-FSR rules were expressed to cover e-commerce markets accessible from Australia which targeted Australian investors or which didn't contain information which indicated to which foreign jurisdiction the market was subject.
Under FSR, the concept of "operating in this jurisdiction" is not defined otherwise than as indicated above. (It was also stated in the Explanatory Memorandum to the FSR Act that "it is expected that mere accessibility by one or a few persons in Australia to an electronic market operated from an overseas jurisdiction will not constitute operation of the market in Australia.")
There's a similar but more explicit approach for financial services businesses - the legislation regulates a business intended to induce people in Australia to use its financial services or likely to have that effect. Conduct from wherever and by whatever means, which targets Australian investors and users of non-cash payment facilities, is covered.
For more information, see our pages on retail banking and wholesale banking.
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