Overview

The 2021-2022 Budget contains funding for a range of Treasury projects related to Financial Services Regulation.

Financial Market Infrastructure Regulatory Reforms

The Government will introduce a Financial Market Infrastructures (FMIs) regulatory reform package to provide Australian Regulators with sufficient power to pre-emptively identify and manage risks, or intervene in a FMI failure crisis.

The reform package will:
• allow the Reserve Bank of Australia (RBA) to manage a failure at a clearing and settlement facility
• enhance the supervisory and licensing power of the Australian Securities and Investments Commission and the RBA
• streamline regulatory powers to improve the efficiency of regulatory administration.

The reforms would apply to the ASX and the derivatives market and would be accompanied by a facility for the RBA to draw up to $5 billion per event as a last resort measure to ensure the continued operation of clearing and settlement facilities, with any funding to be recovered once a crisis is resolved.

Insolvency Reform

The Government will examine ways to improve Australia’s insolvency laws, including consulting on options to:
• clarify the treatment of trusts with corporate trustees under Australia’s insolvency law
• improve schemes of arrangement processes to better support businesses, including by introducing a moratorium on creditor enforcement while schemes are being negotiated.

The Government will also:
• increase the minimum threshold at which creditors can issue a statutory demand on a company from $2,000 to $4,000
• commence an independent review of the insolvent trading safe harbour.

Relief to Foreign Financial Service Providers

The Government will consult on options to restore regulatory relief for Foreign Financial Service Providers (FFSPs) who are licensed and regulated in jurisdictions with comparable financial service rules and obligations, or have limited connection to Australia, from holding an Australian Financial Service License, in order to reduce duplicate regulatory requirements. The relief is limited to FFSPs that deal with wholesale clients and professional investors.

Australian Securities and Investments Commission has previously announced its intention to require foreign financial service providers which deal with wholesale clients and professional investors to hold an Australian Financial Service License from 1 April 2022. Background.

The Government will also consult on options to create a fast-track licensing process for FFSPs who wish to establish more permanent operations in Australia. Fast-tracking is intended to shorten application timeframes and reduce barriers to entering the Australian market.

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Author: David Jacobson
Principal, Bright Corporate Law
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About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.