ASIC Announces Licensing Regime for Foreign Firms, But Leaves out Notable Jurisdictions

The Financial Commission / Regulatory Actions / ASIC Announces Licensing Regime for Foreign Firms, But Leaves out Notable Jurisdictions

The Australian Securities & Investments Commission (ASIC) has announced a plan to accept foreign licensed brokerages and financial firms to be allowed to operate in the country and solicit business from Australian residents and professionals. The Australian market has long been a lucrative destination for Forex brokers and this opens an opportunity for foreign firms with longstanding regulatory approvals elsewhere to join in on some of the action.

According to ASIC, new foreign providers may apply for a foreign AFS licence from April 1,2020 to provide financial services in Australia to wholesale clients. To be eligible, the foreign provider must be authorised under an overseas regulatory regime that ASIC has assessed as sufficiently equivalent to the Australian regulatory regime. It is important to note that the “overseas regulatory regimes” recognized by the Australian regulator include UK Financial Conduct Authority (FCA), the Hong Kong Securities and Futures Commission (SFC), as well as the Monetary Authority of Singapore (MAS), as well as the United States Securities and Exchange Commission, Commodity Futures Trading Commission and Germany’s Bafin and France’s AMF.

Notably, such European jurisdictions, which issue licenses or authorizations to brokers to operate in country, such as Cyprus, Spain, Portugal, Austria, Italy have been left out of the new plan. This is quite odd, considering that CySEC operates within an ESMA and MiFiDII mandate and is arguably a sufficient regulatory regime, while Italy has been very proactive at blocking unauthorized firms in an effort to protect the Italian public from scams.

Indeed foreign firms ready to apply for local authorisation in Australia will be subject to ASIC’s directives and policies, some of which are indicated below and this will further scrutinize the foreign-based brokers operations. Likewise, the uncertainty regarding forthcoming restrictions on leverage and margin trading in Contracts for Difference (CFDs) in Australia may be a deterrent for firms to enter the market at this point.

A foreign AFS licensee will also be subject to supervisory and enforcement provisions applicable to standard AFS licensees, including:

  • ASIC’s power to direct a licensee to provide a written statement;
  • breach reporting requirements;
  • the requirement to give ASIC reasonable assistance during surveillance checks; and
  • the powers available to ASIC in relation to AFS licences, such as the powers to impose or vary conditions on a licence; and vary, suspend or cancel a licence.
Share This Story, Choose Your Platform!