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A person who carries on a financial services business in Australia must hold an Australian Financial Services Licence (“AFSL“), unless an exemption or relief applies. Three new licensing exemptions for foreign financial services providers (“FFSPs“) will commence on 9 April 2027. These are:
- Professional investor exemption
- Comparable regulator exemption
- Market maker exemption
Professional investor exemption
This exemption is relevant for FFSPs who provide financial services from outside Australia to professional investors. To rely on this exemption, all of the following criteria must be satisfied:
- The financial service is provided only to professional investors. It’s important to note that not all wholesale clients are professional investors.
- The FFSP provides the financial service from outside Australia (except during limited marketing visits). Each representative of the FFSP must not spend more than a total of 28 calendar days, for each financial year, in Australia engaging with clients or prospective clients.
- The FFSP’s head office and principal place of business are located outside Australia.
- The FFSP reasonably believes that providing the financial service would not contravene any law applying in the jurisdiction out of which they operate, including the location of their head office and principal place of business address.
- The FFSP notifies ASIC that it intends to rely on this exemption to provide the financial service.
Regulations may specify the kinds of financial products, financial services or professional investors to which this exemption does not apply.
Note: This new professional investor exemption replaces the existing professional investor exemption located in subsection 911A(2E) of the Corporations Act (as inserted by regulation 7.6.02AG of the Corporations Regulations).
Comparable regulator exemption
This exemption is relevant for FFSPs that are regulated in an overseas jurisdiction. To rely on this exemption, all of the following criteria must be satisfied:
- The FFSP is a foreign company or partnership.
- The FFSP is authorised, registered or licensed by a comparable regulator to provide the same or substantially same financial service in a comparable jurisdiction. The questions of what a “comparable regulator” and “comparable jurisdiction” are will be determined by the Minister through separate legislative instrument(s), although it is expected that the authorities specified in the ASIC Corporations (Foreign Financial Services Providers—Foreign AFS Licensees) Instrument 2020/198 will be taken to be comparable regulators. This includes the US SEC/OCC/CFTC, Singapore MAS, Hong Kong SFC, UK FCA etc.
- The financial service is provided only to wholesale clients.
- The financial service may be provided from within Australia or from another jurisdiction where the FFSP is regulated by the comparable regulator.
- The FFSP notifies ASIC that it intends to rely on this exemption to provide the financial service.
Note: This new comparable regulator exemption replaces the existing sufficient equivalence relief.
Market Maker exemption
This exemption is relevant for FFSPs who provide market making services in relation to derivatives. To rely on this exemption, all of the criteria must be satisfied:
- The FFSP makes a market in derivatives that are able to be traded on a prescribed financial market. Regulations will specify the licensed financial markets which are prescribed for the purposes of this exemption.
- The FFSP provides the financial service from outside Australia.
- The FFSP’s head office and principal place of business are located outside Australia.
- The FFSP reasonably believes that providing the financial service would not contravene any law applying in the jurisdiction out of which they operate, including the location of their head office and principal place of business address.
- The FFSP notifies ASIC that it intends to rely on this exemption to provide the financial service.
How to notify ASIC of intention to rely on an exemption?
Notification to ASIC is via lodgement of the relevant form with ASIC (details have not yet been released by ASIC). This form can be lodged up to 15 business days prior to starting to provide the financial service, and must be lodged within 15 business days after starting to provide the financial service. FFSPs can rely on one or more exemptions simultaneously, provided they meet the criteria for each relevant exemption.
Conditions applicable to FFSPs which rely on the new exemptions
FFSPs which rely on the new exemptions must ensure compliance with the following conditions, otherwise ASIC can take action to impose civil penalties, additional conditions or cancel the FFSP’s exemption.
|
Condition
|
Professional investor exemption
|
Comparable regulator exemption
|
Market maker exemption
|
|---|---|---|---|
| The financial service is provided only to professional investors | ✓ | ||
| The financial service is provided only to wholesale clients | ✓ | ||
| The financial service is only provided from outside Australia | ✓ | ✓ | |
| The financial service can be provided from within Australia | * only limited marketing visits to Australia permissible | ✓ | |
| Have an agent resident in Australia if providing financial services in Australia for more than 9 consecutive business days | ✓ | ||
| Consent to information sharing between ASIC and each comparable regulator | ✓ | ||
| Notify ASIC of any significant enforcement action, disciplinary action or investigation undertaken against the FFSP by any foreign regulator, government authority or financial market operator | ✓ | ||
| Provide reasonable assistance to ASIC | ✓ | ✓ | ✓ |
| Comply with ASIC directions | ✓ | ✓ | ✓ |
| Submit to the non-exclusive jurisdiction of Australian courts when proceedings are brought by ASIC or a Commonwealth authority | ✓ | ✓ | |
| Do all things necessary to ensure that financial services provided in Australia are provided efficiently, honestly and fairly | ✓ | ✓ | ✓ |
| Notify each client which exemption the FFSP is relying on to provide the financial service | ✓ | ✓ | |
| Notify ASIC of any changes to the FFSP’s contact details as soon as practicable after the change happens | ✓ | ✓ | ✓ |
| Notify ASIC of any contravention of exemption conditions within 30 business days after becoming (or reasonably expected to be) aware of the contravention | ✓ | ✓ | ✓ |
Funds management relief
Separately, ASIC has provided a licensing exemption to FFSPs that provide certain funds management services. This exemption will commence on 1 April 2027, pursuant to the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199.
FFSPs subject to current licensing relief
FFSPs that are currently relying on the individual relief, class-based sufficient relief or limited connection relief can do so until 31 March 2027 (refer to ASIC Corporations (Foreign Financial Services Providers) Instrument 2025/798). FFSPs should review their operations and consider whether any of the new licensing exemptions can be relied upon, or prepare to apply for an AFSL. More information about the standard AFSL application process and requirements is available here.
FFSPs that decide to apply for an AFSL may benefit from an exemption from the fit and proper person test, thus fast-tracking the licensing process. This exemption applies if both of the following criteria are met:
- The FFSP is applying for an AFSL to provide financial services to wholesale clients only.
- The FFSP is a foreign company or partnership that is regulated by a comparable regulator.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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