Foreign Financial Service Provider’s guide to the new licensing regime

How can a Foreign Financial Services Provider (FFSP) operate in Australia?

Background

If you are a foreign entity carrying on a financial services business “in Australia” then you must hold an Australian Financial Services License (AFSL) or otherwise meet an applicable exemption.  The financial services regime in Australia is notoriously complex and the exemptions for FFSPs are technical in nature and narrowly focussed.

Add in the complexity of a foreign jurisdiction and a FFSP is often rethinking a strategy involving Australian opportunities. For a long time the Australian FFSP regime has been largely unstructured and subsisted through a series of legislative instruments and regulations that operated in isolation. A brief summary of the existing regime and the new regime to apply from April 2027 is provided below:

Class Order Arrangements

These arrangements essentially provide that a FFSP that is already regulated in what is considered a comparable jurisdiction would be able to operate in Australia offering the same products and services that the FFSP is licenced to provide in its home jurisdiction.  The class order relief imposed some ongoing compliance and notification obligations but otherwise allowed FFSPs that signed up for the arrangement to operate in Australia.  Frustratingly, this class order relief ceased in 2020 and ASIC did not allow any new FFSPs to seek such relief except through an individual application to the regulator.

Limited Connection Relief

The “limited connection” relief provides that a person that is outside Australia will not be deemed to be carrying on a financial services business in Australia only because it engages in conduct that induces a person in Australia to use its financial services. However, this relief is limited to conduct in relation to wholesale clients.

New arrangements for FFSPs from 2027

The above arrangements have been continually extended over a period of six years while awaiting the passage of a more structured and permanent regulatory regime for FFSPs.

In April this year the government passed the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Act 2026 which, despite its title, included a new FFSP regulatory regime.

The new regime introduces the following new licensing exemptions which commence on 1 April 2027.

Professional Investor Exemption

This exemption is available to a FFSP that:

1. has a principal place of business and head office outside of Australia;
2. provides financial services only to “professional investors” (a sub-category of wholesale clients);
3. reasonably believes that that they are providing the same or substantially the same financial services that they would be permitted to provide in their home jurisdiction; and
4. has provided notice to ASIC of their intention to rely on this exemption in providing the financial services.

Comparable Regulator Exemption

Operating in a similar fashion to the earlier Class Order arrangements, this exemption applies where:

1. the FFSP has a principal place of business and head office outside of Australia;
2. the FFSP holds the required authorisations and licences to offer the financial services in a comparable jurisdiction;
3. the regulator in the comparable jurisdiction is recognised as a comparable regulator; and
4. the FFSP has provided notice to ASIC of their intention to rely on this exemption in providing the financial services.

Make a Market exemption

This exemption relates to financial services involved in marking a market for derivatives that are able to be traded on a licensed market and is available where:

1. the financial services are provided outside the jurisdiction;
2. the FFSP has a principal place of business and head office outside of Australia;
3. the FFSP reasonably believes that that they are providing the same or substantially the same financial services that they would be permitted to provide in their home jurisdiction; and
4. the FFSP has provided notice to ASIC of their intention to rely on this exemption in providing the financial services.

These exemptions are also subject to conditions which will include obligations to:

1. comply with reasonable requests for assistance from ASIC in the performance of its duties and the exercise of its powers,
2. notify ASIC as soon as practicable of any changes to the FFSP’s contact details, comply with breach reporting requirements,
3. do all things necessary to ensure the financial services provided predominately in Australia are provided efficiently, honestly and fairly and
4. comply with written directions from ASIC to provide information about the FFSP’s financial services and financial services business.

Marketing Visits

For an FFSP relying on the professional investor exemption the new regime allows for the entity to send a representative to Australia to conduct marketing visits. A representative is permitted to conduct marketing visits in Australia for up to 28 days per year per representative.  This allocation does not need to be exhausted in a single visit. The visits will need to be notified to ASIC in writing and are subject to certain conditions.

Funds Management Relief

The Limited Connection Relief will not continue on after 31 March 2026. Instead ASIC has  provided “funds management” relief under a legislative instrument. This relief will allow a FFSP to provide certain financial services in relation to certain offshore financial products. The application of the funds management relief is limited to a new subcategory of investors referred to as “eligible Australian user”. An eligible Australian user is a restricted group made up of predominately trustees of funds that have net assets of at least $10 million. This relief arrangement is also subject to certain conditions including the requirement to have a local agent and providing notification to ASIC that of intention to rely on the relief.

FAQs of the new FFSP regime.

What if none of the exemptions apply to me?

If none of the new exemptions apply to you then you will need an AFSL in order to provide financial services to Australian resident investors.  However, FFSPs can apply to ASIC for a “foreign” AFSL which contains reduced regulatory obligations when compared to a “full” AFSL.

I am relying on the class order arrangements right now, do I need to do anything?

In short, not yet. However, it is expected that ASIC will allow for a transition to the new regime later in the year.  You should ensure you remain in contact with your local agent and consider engaging with your local legal advisers to notify you when you can start the process of transitioning to the new regime.

Is there anything else I need to consider?

Once you have moved to the new regime you will need to ensure you update your website, forms and marketing material to correctly reflect your ability to offer financial services in Australia.  We can assist with this process.

What can I do right now to get ready for the new regime?

You should obtain legal advice to determine which, if any, of the relief options is suitable to your requirements. Holley Nethercote has lawyers that are highly experienced with assisting FFSPs navigate the Australian regulatory regime.

Author: Merren Taylor (Senior Associate)

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