The introduction of foreign AFS licences will impose significant compliance costs on FFSPs. The costs associated with an application for an AFS licence can often be in excess of A$50,000, and this does not include the ongoing compliance costs. This is particularly problematic because providers of financial services who induce persons to use their services are covered by our licensing regime, even where the services are provided entirely from outside of Australia. This means FFSPs will be required to make significant upfront investment before they know whether they will be appointed by any Australian based clients.
The introduction of foreign AFS licences will also impose significant time delays on entry into the Australian market for FFSPs. At present, the time frame for processing a licence application can be up to 12 months. In this regard, we also consider the current proposed transition period of 12 months is unlikely to be sufficient, and should be lengthened to at least 24 months to provide sufficient time for FFSPs to obtain an AFS licence once ASIC has implemented the regulatory framework.
Consideration also needs to be given to grandfathering FFSPs who have been engaged to provide financial services to a small number of Australian wholesale clients and whose circumstances do not warrant the additional costs of obtaining a licence.
Whilst certain licensing obligations will not apply to FFSPs where there is a sufficient equivalent obligation in their home jurisdiction, many conduct obligations will still apply. FFSPs will need to implement compliance measures to meet these obligations.