ASIC extends transitional arrangements for FFSP relief

On 2 August 2022, the Australian Securities and Investments Commission (ASIC) has again announced an extension of the transitional arrangements to certain exemptions applying to foreign financial services providers (FFSPs) for a further 12 months. The arrangements now expire on 31 March 2024.

Transitional exemptions

Both in the past and currently, FFSPs have been able to avail themselves of the need to hold a fully fledged Australian financial services licence (AFSL) or a foreign AFSL, under certain relief exemptions, such as the ‘limited connection’ relief and ‘sufficient equivalence’ relief. These avenues for relief were due to expire on 31 March 2023 and be replaced by the foreign AFSL regime and further passporting exemptions.

However, in 2022, and because of the effects of COVID-19, the then Liberal Government introduced a new Bill in Parliament to provide new exemptions in place of the abovementioned. These would be called the ‘comparable regulator’ and ‘professional investor’ exemptions. These exemptions would not be subject to an expiry period, but would exist on an ongoing basis for FFSPs. The Treasury saw this approach as necessary to improving conditions for foreign direct investment into Australia post COVID-19, in financial services.

However, owing to the 2022 federal election, the Bill unfortunately lapsed and FFSPs faced an uncertain period, post 31 March 2023.

Further extension

ASIC has now issued the ASIC Corporations (Amendment) Instrument 2022/623 to delay the expiry of the transitional arrangements a further 12 months, to 31 March 2024. This allows FFSPs relying on the relief abovementioned to continue to do so with certainty for a further 12 months.

What’s to come?

It is expected that ASIC and the Treasury will consult further on the Bill in order to provide more cemented regulatory relief for FFSPs relying on an exemption (or those that seek to) by 31 March 2024.  ASIC have reported that this does not affect FFSPs currently operating under a foreign AFSL, and that otherwise, the regulator will continue to hear applications for individual relief from FFSPs on a case-by-case basis.

The above post is merely general commentary on developments and is not legal advice.

ASIC’s approach ahead of significant upcoming law reform in October 2021

Ahead of the effectiveness of significant law reform for the broader financial services industry, ASIC Chairman Joe Longo stated that:

“While these reforms have been in the pipeline for some time, ASIC recognises they require significant changes to businesses systems and processes and take effect at the same time industry is facing other challenges, including from COVID-19 and renewed lockdowns.

BWe (ASIC) recognise there will be a period of transition as the industry finalises implementation of additional compliance measures, and ASIC will take a reasonable approach in the early stages of these reforms provided that industry participants are using their best efforts to comply.”

October Reforms for Financial Services Providers

The reforms set to commence in October 2021 include:

b) Anti-Hawking Provisions
The Anti-hawking provisions reinforce and extend the law on cold-calling and other unsolicited offers of financial products to retail clients.

c) Deferred Sales Models for Add on Insurance Products
Owing to the significant consumer detriment created by the industry for add on insurance products at the point of sale, the law has been reformed to introduce a mandatory four-day pause between the sale of a product or service and the offer of add-on insurance connected. The law also prohibits other poor practices in the industry such as where those add on insurance products are not fit-for-purpose.

d) Internal Dispute Resolution Standards
Updated standards applying to financial services firms dealing with retail clients including, reduced timeframes for providing responses to complainants, a broader definition of ‘complaint’, mandatory record-keeping and systemic issue escalation and reporting.

e) Breach Reporting
The ASIC Breach Reporting framework has been significantly reformed to ensure clearer and more timely reporting to ASIC, with the introduction of the ‘reportable situation’ and a far broader scope of circumstances and contraventions that will become reportable to ASIC. The framework will also extend to credit licensees. ASIC’s regulatory guidance on the breach reporting framework has not yet been finalised in RG 78.

f) Reference-checking and Information Sharing Requirements
Through the reference checking and information sharing requirements, ASIC will have more transparency around mortgage brokers and financial advisers’ misconduct in relation to their consumers.

Concluding comments

Largely borne out of the key findings and recommendations of the Hayne Royal Commission, the reforms, whilst undeniably burdensome for financial services firms, will provide ASIC with invaluable transparency into the conduct of businesses in the space, their dispute resolution with clients, key feature of firms’ products and above all, the more equitable treatment of consumers of financial products and services.

ASIC will be far more equipped to identify and respond to contraventions and instances of consumer detriment quickly and efficiently.

This update is general in nature. It is not legal advice and as such, it should not be relied upon for any reason.