AFSL Foreign Exemptions in 2025

Australia’s approach to regulating overseas financial services providers (FFSPs) has undergone substantial change over recent years. For a long time, foreign businesses offering services to wholesale clients in Australia could rely on broad “class order” exemptions if they operated under a comparable regime overseas. Those class orders were repealed in 2020, but transitional relief has continued for FFSPs who notified the Australian Securities and Investments Commission (ASIC) in time. Meanwhile, Parliament has introduced legislation that, if passed, would launch a brand-new FFSP licensing regime from 1 April 2025.

Yet, as of late October 2024, the Bill remains before the Senate. Its outcome, as well as the exact shape of any future relief, may not be confirmed until at least February 2025 when Parliament next sits. Below is a summary of the current landscape for foreign providers and how ASIC’s latest guidance explains the steps to secure permission to operate in Australia under the rules that exist now.

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Australia’s regulatory requirements for foreign financial services providers (FFSPs) continue to evolve. Although ASIC repealed several longstanding “class orders” in March 2020, transitional relief was made available for providers who had relied on them. This transitional relief has since been extended until 31 March 2026, giving eligible FFSPs additional time to adapt.

Meanwhile, Parliament is considering a new legislative framework under the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023, which proposes to establish fresh licensing exemptions for overseas operators. If passed, these exemptions could commence from 1 April 2025. Below is an overview of how the extended transitional relief interacts with the proposed regime, and what foreign providers might expect if the Bill becomes law.

Transitional Relief Until 31 March 2026

Under ASIC’s extended transitional arrangements, FFSPs that had notified ASIC before 31 March 2020 about their reliance on repealed class orders can continue doing so until 31 March 2026. This extension offers a longer grace period than originally planned, allowing those providers to keep operating without obtaining a full Australian Financial Services Licence (AFSL) until that deadline—or until they opt in earlier to the new regime once it commences.

FFSPs that do not currently fall under the extended transitional relief must generally rely on existing pathways, such as individual licensing relief or a Foreign AFSL. ASIC Information Sheet 157 (INFO 157) outlines the process for seeking individual relief under present rules.

The Proposed 1 April 2025 Regime

The Bill currently before the Senate aims to introduce three new exemptions into section 911A(2) of the Corporations Act 2001 (Cth):

1. A professional investor exemption (proposed paragraph (eo)) for services provided solely to professional investors from outside Australia. Limited in-person marketing visits are permitted under proposed section 911E, but otherwise the service must be carried on offshore, and the provider must reasonably believe it is compliant with its home-country laws.
2. A comparable regulator exemption (proposed paragraph (ep)) for foreign companies or partnerships that hold the necessary authorisations in a “comparable jurisdiction” as determined by ASIC. This relief covers wholesale clients in Australia and requires, among other things, local agency arrangements and notice to ASIC.
3. A market-making exemption (proposed paragraph (eq)) specifically aimed at providers making a market in certain exchange-traded derivatives. Similar geographical and home-country compliance requirements apply here, along with mandatory notification to ASIC.

If the Bill passes largely as proposed, these exemptions will come with conditions found in a new Subdivision B. Among these conditions are obligations to assist ASIC with information requests, submit to the non-exclusive jurisdiction of Australian courts for any regulatory proceedings, and keep ASIC apprised of significant enforcement actions abroad. A “fit and proper person” test would also apply, allowing ASIC to cancel or suspend an exemption if it believes that standard is not being met.

Notice Requirements and Conditions

Each new exemption requires a provider to notify ASIC in a form it approves. The Bill envisages a 15-business-day window to submit this notification, beginning 15 business days before the service starts and ending 15 business days after the first day of providing it. Providers who later wish to exit the exemption can notify ASIC again in writing, and potentially re-notify if they choose to rely on it again in the future.

Further ongoing obligations include informing ASIC of changes to contact details, providing written disclosure to Australian clients that the provider is exempt from holding an AFSL, and ensuring services are conducted efficiently, honestly, and fairly. Failure to meet these conditions may expose the provider to civil penalties or partial or full cancellation of the exemption.

Impact of Parallel Timelines

While the Bill targets 1 April 2025 as the start date for this new FFSP regime, the extended transitional relief continues until 31 March 2026 for providers who were already relying on the old class orders before 31 March 2020. That means FFSPs under transitional relief will not be forced to switch frameworks on 1 April 2025; they can choose to opt in earlier by notifying ASIC of their reliance on one of the new exemptions, or they can stay with the transitional arrangements until the cut-off date.

For providers who are new entrants—or were not previously covered by class order relief—the new exemptions (if enacted) may offer a more streamlined licensing alternative to obtaining a Foreign or Full AFSL. However, each exemption entails its own detailed conditions that must be carefully managed. Entities should be mindful that the Bill must still pass Parliament, and the next sitting period is scheduled for February 2025. The final version of the legislation may differ from what is currently proposed, or Parliament could delay the start date.

Planning for the Future

Given this uncertainty, FFSPs are encouraged to keep a close watch on Parliament’s deliberations. If the Bill passes, providers serving wholesale clients or professional investors will have a clearer (though still regulated) path to operate in Australia without a full AFSL. But anyone relying on either the old relief or new exemptions should maintain a robust compliance framework, particularly around disclosure obligations and assisting ASIC on request.

Providers already covered by transitional relief should consider whether opting in early is beneficial, especially if their business model will fit neatly under one of the proposed exemptions. New entrants who cannot wait for 2025 should follow INFO 157 for guidance on applying for individual relief or consider whether a Foreign AFSL is more appropriate. The overlapping dates and multiple options make it essential to seek professional legal advice to navigate this transitional phase effectively.

Conclusion

Australia is heading toward another major shakeup in how foreign financial services providers can access its wholesale and professional investor markets. While the Bill envisions new exemptions starting 1 April 2025, ASIC has extended transitional relief for many FFSPs until 31 March 2026, creating a parallel timeline that offers flexibility. Ultimately, anyone looking to serve Australian clients should track the Bill’s progress, be prepared to notify ASIC if an exemption applies, and ensure they can meet the strict conditions tied to these new pathways.

‍Disclaimer

This article provides general information only and does not constitute legal advice. You should seek professional legal counsel in Australia regarding your specific situation. Liability limited by a scheme approved under Professional Standards Legislation.

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