Blog: ASIC Drafts Reporting Rules for Foreign Brokers with Aussie Clients – Finance Magnates

The Australian Securities and Investments Commission (ASIC) is moving towards tightening rules for foreign financial services companies with Australian operations. From October 2024, foreign brokers dealing with Australian retail clients will likely have to report their local transactions to the Aussie regulator.

ASIC to Bring Reporting Rules for Foreign Brokers

ASIC
ASIC

The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the

The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the
Read this Term
first proposed the derivatives transactions rules in a consultation paper published in November 2020 and then came up with further clarifications in a consecutive consultation paper on May 2022. It has finalized the new rules, according to a response paper it published last month.

“At this stage, our interpretation is that if brokers are targeting Australian clients in any way, in addition to its current activities, ASIC is likely to step up its enforcement to ensure those brokers comply with Australian laws where needed,” Sophie Gerber, principal of legal firm Sophie Grace and the co-CEO of TRAction Fintech, explained to Finance Magnates.

Sophie Gerber, TRAction Fintech

“Incorporating reporting requirements into these scenarios where a firm comes within the parameters of ASIC regulation
Regulation

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (
Read this Term
is an important additional regulatory tool because it creates scope for ASIC to see the extent of this activity, which would be difficult for them to ascertain otherwise.”

ASIC Closes Regulatory Loopholes

This came as many brokers have the view that they are not regulated in Australia and therefore don’t have any registration requirements in the country. The commencement of the new rules will cement ASIC’s enforcement requirements in the Aussie law, or else the firms might face a cease and desist order.

Currently, ASIC overlooks all the financial services companies that have obtained an Australia Financial Services (AFS) license. However, no law prohibits offshore brokers or financial services firms from onboarding Australian clients.

However, the existing ASIC rules were drafted in 2015, and the market has changed significantly. Now, the re-write of the rules shows the regulator’s broader interest in the transaction activities of Australian retail clients with foreign brokers.

ASIC also kept the scope of the upcoming rules broad. Any firm conducting operations from Australia (regardless of which customers are being onboarded), accepts or has accepted Australian retail clients, or targets Australian clients needs to ensure they review their requirements for doing so and continuing to do so in the future.

“As the rules commence and ASIC begins its enforcement processes, we anticipate that over time it will lead to a shift in how foreign brokers onboard and deal with Australian clients. Firms that already have an AFSL in their group structure may re-direct Australian clients to their AFSL entity and not permit them to onboard with any other group entity where they may currently be doing so,” Gerber added.

Two Major Reporting Re-Writes

The timing to implement the new reporting rules is also well-thought-out. It aligns with the upcoming EMIR Refit that will come into effect in early 2024, thus allowing global firms to allocate their resources for re-writes in transaction reporting at once.

ASIC is considered one of the reputed financial market supervisors. The new rules are coming after ASIC already brought restrictions in the retail trading market over recent years. AFS license holders can only offer leverage up to 30:1 and implement other marketing restrictions. The regulator also temporarily banned the offering and selling of retail binary options.

“These enhanced provisions being implemented by ASIC come at a time when other regulators around the world are starting to look more closely at the offshore activities of firms that they are regulating (or their other group entities), e.g. UK and St Vincent’s. There seems to be a clear move by regulators to try and regain some control over the retail activity, which was effectively sent offshore by product intervention and leverage restrictions,” said Gerber.

The Australian Securities and Investments Commission (ASIC) is moving towards tightening rules for foreign financial services companies with Australian operations. From October 2024, foreign brokers dealing with Australian retail clients will likely have to report their local transactions to the Aussie regulator.

ASIC to Bring Reporting Rules for Foreign Brokers

ASIC
ASIC

The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the

The Australian Securities and Investments Commission (ASIC) is the prime regulator in Australia for corporate, markets, financial services, and consumer credit. It is empowered under the financial service laws to facilitate, regulate, and enforce Australian financial laws. The Australian Commission was set up and is administered under the Australian Securities and Investment Commission Act of 2001. ASIC was initially the Australian Securities Commission based on the 1989 ASC Act. Initially, the
Read this Term
first proposed the derivatives transactions rules in a consultation paper published in November 2020 and then came up with further clarifications in a consecutive consultation paper on May 2022. It has finalized the new rules, according to a response paper it published last month.

“At this stage, our interpretation is that if brokers are targeting Australian clients in any way, in addition to its current activities, ASIC is likely to step up its enforcement to ensure those brokers comply with Australian laws where needed,” Sophie Gerber, principal of legal firm Sophie Grace and the co-CEO of TRAction Fintech, explained to Finance Magnates.

Sophie Gerber, TRAction Fintech

“Incorporating reporting requirements into these scenarios where a firm comes within the parameters of ASIC regulation
Regulation

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (

Like any other industry with a high net worth, the financial services industry is tightly regulated to help curb illicit behavior and manipulation. Each asset class has its own set of protocols put in place to combat their respective forms of abuse.In the foreign exchange space, regulation is assumed by authorities in multiple jurisdictions, though ultimately lacking a binding international order. Who are the Industry’s Leading Regulators?Regulators such as the UK’s Financial Conduct Authority (
Read this Term
is an important additional regulatory tool because it creates scope for ASIC to see the extent of this activity, which would be difficult for them to ascertain otherwise.”

ASIC Closes Regulatory Loopholes

This came as many brokers have the view that they are not regulated in Australia and therefore don’t have any registration requirements in the country. The commencement of the new rules will cement ASIC’s enforcement requirements in the Aussie law, or else the firms might face a cease and desist order.

Currently, ASIC overlooks all the financial services companies that have obtained an Australia Financial Services (AFS) license. However, no law prohibits offshore brokers or financial services firms from onboarding Australian clients.

However, the existing ASIC rules were drafted in 2015, and the market has changed significantly. Now, the re-write of the rules shows the regulator’s broader interest in the transaction activities of Australian retail clients with foreign brokers.

ASIC also kept the scope of the upcoming rules broad. Any firm conducting operations from Australia (regardless of which customers are being onboarded), accepts or has accepted Australian retail clients, or targets Australian clients needs to ensure they review their requirements for doing so and continuing to do so in the future.

“As the rules commence and ASIC begins its enforcement processes, we anticipate that over time it will lead to a shift in how foreign brokers onboard and deal with Australian clients. Firms that already have an AFSL in their group structure may re-direct Australian clients to their AFSL entity and not permit them to onboard with any other group entity where they may currently be doing so,” Gerber added.

Two Major Reporting Re-Writes

The timing to implement the new reporting rules is also well-thought-out. It aligns with the upcoming EMIR Refit that will come into effect in early 2024, thus allowing global firms to allocate their resources for re-writes in transaction reporting at once.

ASIC is considered one of the reputed financial market supervisors. The new rules are coming after ASIC already brought restrictions in the retail trading market over recent years. AFS license holders can only offer leverage up to 30:1 and implement other marketing restrictions. The regulator also temporarily banned the offering and selling of retail binary options.

“These enhanced provisions being implemented by ASIC come at a time when other regulators around the world are starting to look more closely at the offshore activities of firms that they are regulating (or their other group entities), e.g. UK and St Vincent’s. There seems to be a clear move by regulators to try and regain some control over the retail activity, which was effectively sent offshore by product intervention and leverage restrictions,” said Gerber.

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