ASIC Prepares New Rules for Aussie’s Foreign Brokers

As part of its duties as a market regulator, the Australian Securities and Investments Commission (ASIC) has published new rules to oversee the financial offerings within the region. The ASIC published the official draft of these new rules in January 2023.

According to the watchdog, the rules will take effect soon, and all financial market brokers are expected to comply with the provisions of the document. In explaining its rationale for creating new rules, the commission explained that it intends to strengthen its supervision of foreign brokers and their service offerings.

Details of ASIC's New Rules Draft

As far back as November 2020, the ASIC prepared a consultation document and a proposal for implementing new financial market regulations. In May 2022, the regulator augmented its effort to implement these new regulations through a public release. Finally, in December 2022, the regulator released a copy of its new rules.

In reacting to this news, some members of the public have speculated that the new rules will take effect from Q1 2022. It is also speculated that the implementation will coincide with the EMIR Refit which is also scheduled to hold in Q1 2022. 

Sophie Gerber, co-CEO of TRAction Fintech, has reacted to the compilation of ASIC's new rules and implementation. She emphasized that if foreign brokers intend to expand beyond their current market operations in Australia, they must be willing to adhere to all ASIC's prescribed laws. She further said that  "the ASIC is likely to tighten its mode of enforcement."

A major feature of the new rules mandate is that Australia's foreign brokers declare their local activities to ASIC. This will become compulsory from October 2024. The regulator is making prior announcements so that foreign brokers have enough time to reschedule their activities to adjust to the regulator’s requirements.

Why is ASIC Proposing These New Rules?

ASIC is recognized as one of the world's most reputable financial industry regulators. However, many foreign brokers in Australia are not licensed by the ASIC; hence, their exemptions from registration requirements. In other words, these foreign brokers have been operating on their terms.

Having recognized the loopholes in the operations of these foreign brokers, the ASIC put up these new regulations to enshrine its enforcement obligations in Australian law. A cease-and-desist order accompanies this if any foreign broker refuses to comply.

Another reason for these new rules is to update regulatory standards since there have been significant market changes following the ASIC 2015 regulations enactment. It is anticipated that the enforcement and implementation of new guidelines would positively change the interaction between existing and intending foreign brokers and the Australian clientele.