ASIC Corporations (Foreign Financial Services Providers - Foreign AFS Licensees) Instrument 2020/198

This instrument gives limited relief from some Chapter 7 requirements in the Corporations Act 2001 for a narrow class of foreign financial services providers. The relief is not general. It only applies to an eligible body, and only in relation to the provision of a wholesale financial service.

An eligible body is a foreign financial services provider that holds an Australian financial services licence authorising it to provide one or more wholesale financial services. That point is critical. The instrument does not replace the need for an AFS licence. It operates on the assumption that the provider already has one, and then modifies some compliance obligations that would otherwise apply.

The instrument also makes targeted modifications to Part 7.8 of the Corporations Act for eligible bodies when they provide wholesale financial services. Those modifications deal with particular client money, property and transaction provisions identified in the instrument.

For businesses, the practical effect is that this is a conditional compliance relief regime for certain licensed foreign providers, not a free-standing permission to enter the Australian market. If the provider is not licensed in Australia, is not within one of the defined foreign provider categories, or is not providing a covered wholesale service, the instrument does not do the work.

The instrument uses a closed list of foreign provider categories. A provider is only in scope if it falls within one of the specific definitions set out in sections 5 to 17. Those categories are exhaustive for this instrument. If a provider is regulated in another country, or by another authority not named in the instrument, this relief is not available under this instrument.

The listed categories cover certain providers regulated by the US SEC, the US Federal Reserve and OCC, the US CFTC, Singapore MAS, Hong Kong SFC, German BaFin, Luxembourg CSSF, UK regulators through a current Part 4A Permission, Danish FSA, Swedish FI, French AMF, French ACPR, and the Ontario Securities Commission.

Each category has its own detailed definition. In general terms, the provider must hold the required overseas registration, licence, approval, authorisation or permission for that category, be incorporated or formed in the relevant jurisdiction, and carry on business in that jurisdiction. Some categories are narrower than they first appear. For example, the US categories distinguish between SEC regulated entities, Federal Reserve and OCC regulated entities, and CFTC regulated entities, each with their own criteria.

The definitions are technical. For example, some categories refer to a current licence, some to a current registration, some to a current authorisation, and some to a current permission. The instrument also ties each provider type to a specified home jurisdiction and specified wholesale financial services in Schedule 1. That means a provider cannot rely on a broad claim that it is generally well regulated overseas. It must fit the exact statutory category.

The relief is limited to wholesale financial services. It does not extend to retail clients. The definition of wholesale financial service in the instrument has two parts. First, the service must be covered by the provider's AFS licence. Second, it must be one of the services specified for that type of foreign provider in Schedule 1. The note to the definition makes clear that a financial service will only be a wholesale financial service if it is provided to a wholesale client.

That means businesses should not assume that every service offered by an eligible foreign provider is covered. The service must sit within the provider's Australian licence and within the Schedule 1 description for that provider type. If the provider deals with retail clients, or provides services outside the defined wholesale scope, the instrument does not give relief for that activity.

For Australian businesses, the practical question is not just whether the provider is foreign and regulated overseas. It is whether the actual service being supplied to the actual client in Australia falls within the instrument's wholesale-only framework.

This is especially important for businesses that have mixed client bases or multiple service lines. A provider may be eligible for relief for one wholesale service to one wholesale client, but not for another service, another product, or another client type. The service-by-service and client-by-client analysis matters.

Section 18 says an eligible body does not have to comply with certain Chapter 7 requirements in relation to the provision of a wholesale financial service. The listed relief includes parts of paragraph 912A(1)(b) to the extent it requires compliance with paragraphs 7.6.04(1)(a) and (d) of the Corporations Regulations, paragraphs 912A(1)(d) to (f), sections 912AAC and 912AAD as notionally inserted by ASIC Class Order [CO 13/1410], section 912AC as notionally inserted by ASIC Corporations (Financial Requirements for Custodial or Depository Service Providers) Instrument 2023/648, and section 1017E.

Section 18 also provides relief from section 991F for an eligible body and its employee if the eligible body is only carrying on a financial services business in this jurisdiction because it carries on a business of providing wholesale financial services in this jurisdiction.

This is targeted relief, not a full carve-out from Australian regulation. The provider remains an AFS licensee and must still satisfy the instrument's conditions and any other applicable Australian requirements that are not expressly relieved.

The instrument itself notes that some eligible bodies may also be able to rely on financial reporting and record keeping relief in ASIC Corporations (Foreign Licensees and ADIs) Instrument 2016/186. That note does not expand this instrument. It simply signals that another relief instrument may also be relevant in some cases.

Section 19 sets out the conditions for relying on the section 18 relief. These conditions are central to the regime.

First, unless the eligible body is a company, it must have an agent appointed at the time it first purports to rely on the instrument and must not fail to have an agent for any consecutive period of 10 business days. The instrument defines agent differently depending on whether the eligible body is a foreign company or not.

Second, the eligible body must reasonably believe that it would not contravene any laws of its home jurisdiction relating to the provision of financial services if it were to provide the relevant wholesale financial service in its home jurisdiction.

Third, the eligible body must notify ASIC in writing no later than 15 business days after it becomes aware, or should reasonably have become aware, of certain matters. These include ceasing to be a foreign financial services provider, each significant change to the overseas registration, licence, approval, authorisation or permission referred to in sections 5 to 17, each significant exemption or other relief obtained from home-jurisdiction regulatory requirements relevant to that overseas status, and each significant investigation, significant enforcement action and significant disciplinary action by an overseas regulatory authority in relation to financial services provided in that foreign jurisdiction. There is a limited qualification where the provider is prohibited by law from giving the notification, but only to the extent of that prohibition.

These are ongoing conditions, not one-off entry requirements. A provider may start within the regime and later fall out of it if its overseas status changes, its AFS licence no longer covers the service, its agent arrangements lapse where required, or it does not meet the notification condition.

Section 20 declares that Part 7.8 of the Corporations Act applies to an eligible body as if certain provisions were modified. These modifications apply in relation to the provision by the eligible body of a wholesale financial service.

The modifications include changes to paragraph 981A(2)(d), paragraph 982A(2)(b), section 984A and section 991E. In practical terms, the instrument adds references to an eligible body in some client money and property provisions, provides that Division 2 of Part 7.8 does not apply to property given to an eligible body, and provides that subsection 991E does not apply to a financial product transaction entered into outside Australia by an eligible body.

These are technical changes and should be read carefully against the exact statutory text. Businesses dealing with custody, client money, property transfers or offshore transaction execution should check the underlying provisions and the modified wording before assuming how the regime applies in a particular arrangement.

The key point is that the declaration is not universal. It applies to an eligible body in relation to the provision of a wholesale financial service. If the provider is outside that scope, the modified treatment should not be assumed.

The list of jurisdictions and regulators is not illustrative. It is exhaustive for this instrument. A provider from a country not listed, or regulated by a body not captured by the relevant definition, cannot rely on this instrument just because its home regime looks similar.

Even within a listed jurisdiction, the provider must match the exact category. For example, the instrument separately defines US SEC regulated providers, US Federal Reserve and OCC regulated providers, and US CFTC regulated providers. The same approach applies across the other listed jurisdictions. The instrument also links each provider type to a specified home jurisdiction and specified wholesale financial services in Schedule 1.

For counterparties and compliance teams, this means the right question is not simply, "Is this provider regulated overseas?" The right question is, "Does this provider fit one of the exact statutory definitions, and is the service one of the specified wholesale financial services for that provider type?"

This matters in contracts, onboarding and due diligence. If your business is appointing, distributing through, or outsourcing to a foreign provider, your checks should line up with the instrument's exact categories rather than a general description of the provider's business.

If your business is a foreign provider, an Australian wholesale client, or an Australian intermediary, do a structured check before relying on the instrument.

Start with status. Confirm the provider still falls within one of the defined foreign provider categories and still holds the required overseas authorisation. Then confirm the provider holds an AFS licence authorising the relevant wholesale financial services in Australia. Next, test the service itself. It must be a wholesale financial service within the instrument, not a retail service, and it must be one of the services specified for that provider type in Schedule 1.

Then review conditions and governance. Check whether an agent is required and properly maintained, whether there is a process for identifying significant overseas regulatory changes, and whether ASIC notifications can be made within the required timeframe. If your arrangement involves client money, property or offshore execution, review the Part 7.8 modifications carefully.

Also check whether the provider is relying on this instrument only for the activities it actually performs for your business. A provider may have broader overseas permissions than the Australian relief allows. The Australian analysis still turns on the AFS licence, the provider category, the Schedule 1 service description and the wholesale client requirement.

Finally, check the current version of the instrument. The compilation in force is dated 1 September 2023, but legislative instruments can be amended or repealed before the scheduled repeal date.

The instrument is in force. The current compilation referred to here is Compilation No. 1, as in force on 1 September 2023. It was made under subsections 926A(2), 992B(1) and 1020F(1) of the Corporations Act 2001.

The Federal Register entry shows a scheduled repeal date of 1 April 2030. That does not guarantee the instrument will remain unchanged until then. It may be amended or repealed earlier, so businesses should always check the latest registered version before acting on it.

Because the instrument has already been compiled and amended, businesses should not rely on an older copy or a general summary alone. The safest approach is to confirm the current registered text and then test the provider, service and client against that text.