FFSP recap 6 min read
In August 2023, the exposure draft of the Treasury Laws Amendment (Measures for Future Bills) Bill 2023, Licensing exemptions for foreign financial services providers (FFSPs) (the Draft Bill), was released for consultation. As set out in our previous Insight, the Draft Bill proposed amendments to the Corporations Act 2001 (Cth) (Corporations Act) that would establish four key exemptions to the existing licensing regime for FFSPs. The consultation period on the Draft Bill ended in September 2023.
In November 2023, the proposed reforms to the FFSP licensing regime were introduced to Parliament in the form of a new bill, the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (the Bill), which had its first and second reading in the House of Representatives on 30 November 2023. While the Bill is substantially similar to the Draft Bill, there have been some important changes.
In this Insight, we'll bring you up to speed on the latest updates to the FFSP regime, preparing you for what's ahead.
- If the Bill is passed, the new FFSP regime will commence on 1 April 2025 (previously 1 April 2024).
- The Bill includes some important improvements for FFSPs, with Treasury having taken on board industry feedback during the consultation period for the Draft Bill.
The Bill is largely similar to the Draft Bill. However, there are a number of welcome changes, which remove some of the previous restrictions that applied to the proposed FFSP licensing exemptions.
|The FFSP exemptions under the Draft Bill were to commence on 1 April 2024.
|If passed, the exemptions will now commence on 1 April 2025.
|Professional investor exemption – dealing exclusion
|Under the Draft Bill, this exemption did not apply where the financial service provided by the FFSP involved dealing in financial products that could be traded on certain licensed markets. The rationale was to protect markets that may have significant retail investor involvement against potential impacts from activities by entities that are not subject to the AFSL regime. However, this restriction would have created a significant limitation to the professional investor exemption, and would have meant that many FFSPs could not rely on the exemption.
|Following consultation, this restriction was removed as a condition of the professional investor exemption.
|Professional investor exemption – marketing visits
|The Draft Bill permitted an FFSP to provide financial services in Australia when those services were provided during one or more marketing visits to Australia.
The total length of marketing visits by representatives of an FFSP in a financial year could not exceed 28 days, and the 28-day limit included each day on which the representative was in Australia, whether or not a financial service was provided on that day. The 28-day limit also applied to the FFSP itself, regardless of the number of representatives who were on marketing visits to Australia.
|The Bill now provides that the 28-day limit does not include each full day on which a representative of the FFSP is in Australia and not engaging with a client or prospective client. This means that, for example, a representative who arrived in Australia and engaged with clients for five days before spending five days on a holiday in Australia would be considered to have only used five out of their 28 days, rather than 10 days.
The Explanatory Memorandum clarifies that the 28-day limit has also been amended to apply to each representative of the FFSP, rather than the FFSP itself, so that each representative has 28 days available to them to conduct their marketing visits in Australia.
|Comparable regulator exemption – location of representatives
|The Draft Bill Included a condition that the FFSP must provide the financial service from Australia or from the comparable jurisdiction.
|This condition has been removed from the Bill.
|Comparable regulator exemption – oversight of representatives
|The Draft Bill included a condition that required the FFSP to maintain adequate oversight over its representatives and to take reasonable steps to ensure that its representatives were adequately trained and competent to provide the financial services.
|This condition has been removed from the Bill.
|Efficiently, honestly and fairly
|The Draft Bill included a condition for an FFSP relying on the professional investor, comparable regulator or market maker exemptions to do all things necessary to ensure that financial services are provided efficiently, honestly and fairly.
|This condition has been retained, but qualified so that it only applies where the FFSP carries on a financial services business predominantly in Australia.
|Consent to the non-exclusive jurisdiction of the Australian courts
|A condition of the professional investor, comparable regulator and market maker exemptions was that the FFSP must agree to legal proceedings relating to the provision of each kind of financial service that it provides in reliance on the exemption being brought in a court in Australia.
|This condition has been retained, but qualified so that it only applies to proceedings being brought by ASIC or a Commonwealth authority.
|Notification of a breach of a condition of an exemption
|If an FFSP breaches a condition of the professional investor, comparable regulator or market maker exemptions, the FFSP was required under the Draft Bill to notify ASIC of the contravention within 15 business days after the day on which the FFSP becomes aware, or would reasonably be expected to have become aware, of the contravention.
|The timeframe for notifying ASIC of the contravention has been extended to 30 business days.
Following the introduction of the Bill to Parliament in November 2023, the Bill was referred to the Senate Economics Legislation Committee for consideration in December 2023. On 18 January 2024, the Bill was considered by the Senate Standing Committee for the Scrutiny of Bills. The report of the Senate Economics Legislation Committee is due in April 2024, and this report will determine whether the Bill proceeds to a third reading in the House of Representatives.
If the Bill is passed, the professional investor, comparable regulator and market maker exemptions, as well as the fit and proper text exemption, will commence on 1 April 2025.