FFSP Update for Foreign Funds

Foreign Financial Services Providers (FFSPs) operating in Australia often face unique challenges when setting up or managing (the relatively simpler structure) the unregistered managed investment schemes (MIS) to wholesale investors only.

It's common in these scenarios for the trustee (and MIS fund) to be located either in Australia (under their own AFSL or intermediary AFSL licence exemption) or located offshore (under foreign exemptions or licensing), while the investment/fund manager is based in Australia (under their own AFSL or Corporate Authorised Representative AFSL licence exemption). Below is a closer look at how the trustee’s role intersects with ASIC’s evolving FFSP regime and the proposed legislative changes.

Why the Trustee’s Role Matters

‍In an unregistered MIS, the trustee typically holds legal title to the scheme’s assets and may also be the entity formally responsible for “offering” or “issuing” units or shares in the fund. Under the Corporations Act 2001 (Cth), issuing financial products is treated as a “dealing” activity, which in turn can require a licence or exemption - especially if offers are made to Australian investors. While many fund structures rely on an Australian AFSL-licensed manager (or responsible entity, in a registered scheme, that licence will not necessarily cover the trustee’s issuing function if the trustee itself is deemed to be carrying on a financial services business in Australia.

The FFSP Angle and Proposed Exemptions

‍If the trustee/fund is overseas and seeking to engage only with wholesale or professional investors in Australia, it may qualify for relief under the new FFSP exemptions proposed in the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (likely to pass in February 2025 and take effect 1 April 2025). Should Parliament pass this Bill, three exemptions would become available from 1 April 2025, with conditions including notifying ASIC, having a head office outside Australia, dealing only with wholesale or professional investors, and complying with “efficiently, honestly, and fairly” obligations. So even though foreign exemption requirements might change, the trustee can still avoid needing to obtain an AFSL if it satisfies one of these exemptions - currently referred to as the comparable regulator exemption, the professional investor exemption or the market-making exemption for certain derivatives.

Transitional Relief and Unregistered MIS

‍ASIC has extended transitional relief for some FFSPs until 31 March 2026, which may help trustees currently relying on older class orders or related instruments. If the trustee and its activities fit within that relief (for instance, under limited connection or other repealed ASIC relief instruments), it can continue without obtaining a fresh licence until it either opts in to the new framework (once it commences or transitional relief expires. However, this transitional window does not universally apply to all offshore trustees. If the trustee does not meet the relevant transitional criteria—or if the fund introduces new offerings to Australian investors beyond that scope—licensing or another exemption will likely be required sooner.

Key Considerations in Practice

‍Where the Australian-licensed fund manager performs all marketing and distribution, the offshore trustee might remain behind the scenes and not be considered to be “carrying on” a financial services business in Australia. In that scenario, the trustee may not need a separate licence or exemption. On the other hand, if the trustee sends subscription documents, interfaces directly with Australian investors, or is otherwise legally responsible for issuing units to them, ASIC could view it as an FFSP. The trustee would then need to rely on the forthcoming FFSP exemptions, obtain a Foreign AFSL or its own AFSL, or become an authorised representative of an appropriately licensed entity.

Why Professional Advice Is Essential

The proposed Bill includes detailed notification requirements, conditions for information sharing and fit-and-proper person tests that could apply to an offshore trustee. Coupled with ASIC’s extended transitional relief, which may or may not cover your particular arrangement, the licensing landscape for unregistered MIS in Australia can become convoluted. Before issuing any units to Australian investors - wholesale, professional, or otherwise - trustees should confirm whether they (or their associated manager) have the right authorisations. If relying on the new exemptions, be mindful of strict notification deadlines and obligations to cooperate with ASIC. And if transitional relief is in play, track its expiry date (31 March 2026) or opt into the new regime as needed.

Conclusion

‍Offshore trustees/funds often assume that having a locally licensed manager or adviser is sufficient. However, Australian law focuses also on the entity actually issuing financial products and dealing with local investors. In many cases, that is the trustee. The proposed FFSP exemptions and continued transitional relief give trustees potential pathways to compliance, but only if they meet the specific criteria or notify ASIC correctly. Navigating these overlapping regimes and determining which party must hold or rely on a licence - or an exemption - requires careful analysis of who is carrying on the financial services business in Australia and how the fund’s units are being offered to investors.

Disclaimer

This article provides general information only and does not constitute legal advice. Always consult qualified Australian counsel regarding your specific arrangements. Liability limited by a scheme approved under Professional Standards Legislation.