The Australian Securities and Investments Commission (ASIC) has today issued four class orders providing technical relief from certain obligations for foreign financial services in certain circumstances.

The relief has been provided in response to two main industry concerns: whether the new financial services reform (FSR) regime applies in some cases to certain providers of foreign financial services or products, and the degree of duplication of obligations under the FSR regime where a service provider is sufficiently regulated in another jurisdiction.

‘This relief will particularly assist foreign service providers that operate in Australia, and Australian licensees trading on overseas markets, by clarifying the application and nature of their obligations under the Corporations Act’, ASIC Executive Director of Policy and Markets Regulation, Mr Malcolm Rodgers said.

The class orders cover the following areas:

• modification of the financial statement and financial record requirements as they apply to foreign authorised deposit-taking institutions (ADIs) [CO 03/823];
• dealing in derivatives or foreign exchange contracts by foreign ADIs that otherwise limit their activities to banking business (ie. deposit-taking and lending) for wholesale clients [CO 03/823];
• clarification of when the licensing provisions apply to wholesale financial service providers who have only a limited connection to Australia [CO 03/824];
• clarification of when the licensing provisions apply where financial products are held by people who move to Australia after acquiring the product [CO 03/825]; and
• exemption from the requirement to keep market related records for transactions with foreign wholesale clients on overseas markets [CO 03/826].

Copies of the class orders can be obtained from ASIC’s Infoline by calling 1300 300 630, or from the ASIC website at www.asic.gov.au.

A summary of the relief under the class orders is provided as an attachment to this information release.

End of release

Download a copy of the class orders:

• [CO 03/823] Relief from licensing, accounting and audit requirements for foreign authorised deposit-taking institutions
• [CO 03/824] Licensing relief for financial service providers with limited connection to Australia dealing with wholesale clients
• [CO 03/825] Licensing relief for the provision of ongoing services in relation to a product acquired when the client was outside the jurisdiction
• [CO 03/826] Market related records: Australian financial service licensees dealing on overseas markets

Attachment to information release IR 03-28

Licensed Foreign Authorised Deposit-taking Institutions (ADIs)

[CO 03/823] provides relief for licensed foreign ADIs from various reporting and accounting requirements in Part 7.8 of the Corporations Act. This class order:

• exempts foreign ADIs* from the detailed financial record requirements of Part 7.8 Div 6 Subdivision B, leaving them subject to a general financial record keeping obligation;
• allows lodgement of audited financial statements prepared in accordance with the financial reporting requirements of the foreign ADI’s home regulatory regime, in lieu of financial statements prepared and audited under Australian standards; and
• exempts foreign ADIs from the requirement to hold an Australian financial service licence where the financial service involves dealing in derivatives or foreign exchange contracts. This aspect of the relief will only apply where the dealing is entered into for the purpose of managing a financial risk that arises in the ordinary course of the banking business of the foreign ADI. The dealing must also have been both entered into on the person’s own behalf and with a counterparty who is a wholesale client.

This relief recognises that some modification of the FSR regime is appropriate for foreign ADIs who are already subject to regulation in their home jurisdiction.

* A foreign ADI is a foreign authorised deposit taking institution, authorised by the Australian Prudential Regulation Authority under the Banking Act.

Dealings with a limited connection to Australia

ASIC has also issued two class orders that clarify application of the financial services regime to foreign providers with a limited connection to Australia.

[CO 03/824] provides relief from the requirement to be licensed for foreign providers of financial services to wholesale clients, where the provider would not need to be licensed other than as a result of s911D of the Corporations Act (ie because otherwise they are not conducting a business in Australia).

[CO 03/825] provides relief from the requirement to be licensed for foreign product issuers, where they continue to provide services to a client who first acquired the relevant product outside Australia but who is now in this jurisdiction (eg has immigrated to Australia and continues to use a financial product acquired before moving here).

This relief clarifies that the FSR regime is not applicable where a foreign financial service provider has only a tenuous and unintended link with Australian clients.

Records of market-related transactions

[CO 03/826] provides specific relief form the requirement in Corporations Reg 7.8.19 to keep records of instructions for market related trades undertaken on behalf of wholesale clients who are not in Australia or who are not carrying on business in Australia. This relief only applies to instructions received on behalf of a wholesale client on a financial market that is not operated in Australia.

This relief recognises that some modification of the FSR regime is appropriate for Australian licensees performing trades on overseas markets on behalf of wholesale clients who are not in Australia.