Australia’s maintains a very broad definition of what it means to “carry on business in Australia” for the purposes of financial services laws and, in the digital age, the line between what is and what is not carrying on business in Australia has become increasingly complex with the emergence of global social media platforms, app stores, and influencers.
In October last year, the Australian Securities and Investments Commission (ASIC) reissued Regulatory Guide 121 (RG 121), which provides updated guidance for foreign entities on whether their activities may constitute carrying on a financial services business in Australia (requiring them to hold an AFS licence unless an exemption applies). As we discussed in our previous post, the reissue of RG 121:
- removed references to expired or repealed AFS licensing relief;
amended descriptions of AFS licensing exemptions and relief to reflect those currently available;
updated the description of the Courts’ interpretation of “carrying on a business in Australia”, including the general indicators of carrying on a business, other relevant factors and when a one-off transaction may amount to carrying on a business; and
updated descriptions of, and references to, certain financial products and services, AFS licensee obligations, legislation administered by ASIC, applicable rules and ASIC’s regulatory documents to reflect the current legal and regulatory framework.
There are significant criminal and civil penalties for offering financial services in Australia without proper licensing.
This week ASIC issued an investor alert warning Australians against trading with an unlicensed financial service provider allegedly offering cryptocurrency futures products. Notably, this appears to be the first time ASIC has identified and issued a warning against overseas crypto-asset related offerings available through app stores. However, the alert acknowledges that the provider has added disclaimers on its website and app, stating that it is unlicensed and that its services are not intended for individuals in Australia.
This is not the first time that ASIC has issued warnings to the public relating to offshore cryptocurrency platforms. In 2021, ASIC issued a general warning that investors engaging with unlicensed platforms may have no access to typical consumer protections under Australian law, such as internal dispute resolution or client money protections.
For overseas financial service providers, this is a timely reminder to consider the scope of any platform offering and marketing efforts which may bring them within the scope of Australian jurisdiction. As for investors, ASIC encourages them to check if a company is licensed, understand how the investments work, assess scam indicators and explore available complaint pathways if something goes wrong.
