Foreign Financial Service Providers – New legislative licensing exemptions – It's been a journey

What you need to know

• After years of "will they or won't they", the new statutory licensing exemptions for FFSPs have finally passed Parliament.
• The new statutory exemptions are:
  • The professional investor exemption;
  • The comparable regulator exemption (i.e. sufficient equivalence); and
  • The market maker exemption.

• The new exemptions come into effect 12 months from Royal Assent. FFSPs can rely on existing sufficient equivalence exemption and limited connection exemption until then.

What you need to do

• To the extent that the existing exemptions are being relied upon to service Australian clients, consider which of the new exemptions could be relied upon going forward (if any).
• Consider the conditions of the new exemptions and implement frameworks and controls to ensure compliance with those conditions.

Background

On 1 April 2026, the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth) (Bill) was passed. The Bill inserts a number of specific legislative exemptions from the requirement to hold an Australian financial services licence (AFSL) for foreign financial services providers (FFSPs) into the Corporations Act 2001 (Cth) (Corporations Act).

When do the new exemptions commence?

The new exemptions will take effect 12 months from Royal Assent. Until then, FFSPs can continue to rely on existing exemptions, such as the "sufficient equivalence" and "limited connection" exemptions under current ASIC relief instruments, noting these are set to expire on 31 March 2027, but may be further extended to address any timing gap before the new exemptions take effect. There are also other exemptions in the Corporations Act and Regulations which continue and are not impacted by the Bill.

What are the new exemptions?

The three new exemptions are the Professional Investor Exemption, the Comparable Regulator Exemption and the Market Making Exemption.

Each of the exemptions is subject to specific conditions. See further below in this update a summary table which compares the conditions across the other new exemptions. Note that all exemptions involve the FFSP filing a notice with ASIC indicating its intention to rely on the exemption.

Professional Investor Exemption

The professional investor exemption is inserted as new section 911A(2)(eo) of the Corporations Act. There is presently no restriction on the types of products and services that can be provided under this exemption. However, Treasury has foreshadowed that Regulations may be made to preclude reliance on the exemption for dealing on certain prescribed financial markets, such as ASX, Cboe Australia or ASX 24.

Key conditions which go to the scope of this exemption are as follows:

• the financial service is provided solely to clients who qualify as professional investors as defined in the Corporations Act;
• the FFSP provides the financial service from a foreign jurisdiction (although the exemption extends to services provided by a representative during a marketing visit to Australia, provided that the representative does not engage in more than 28 days of marketing visits);
• the FFSP's head office and principal place of business are located at one or more places outside of Australia;
• the FFSP reasonably believes that providing the same or substantially the same financial service would not contravene any law applying to the head office/principal place of business or the place from where the financial service is provided; and

Comparable Regulator Exemption

The comparable regulator exemption is inserted as section 911A(2)(ep) of the Corporations Act.

Key conditions which go to the scope of this exemption are as follows:

• the financial service is provided solely to clients who qualify as wholesale clients;
• the FFSP is a foreign company or is a partnership formed outside Australia;
• the FFSP has and maintains any authorisations, registrations or licences (however described) necessary to legally provide the same or substantially the same financial service in a comparable jurisdiction;
• the regulator administering those authorisations, registrations or licences for the comparable jurisdiction is a prescribed comparable regulator; and
• the FFSP provides the financial service from Australia or from the comparable jurisdiction.

The list of "comparable regulators" will be prescribed in the Regulations. It is expected to include the regulators currently covered by the existing sufficient equivalence exemptions, such as the UK FCA, US SEC, US CFTC, Singapore MAS, German BaFin, Hong Kong SFC or Luxembourg CSSF. It is also expected that the prescribed list will include other regulators which have separately been assessed as equivalent for other purposes.

Market Maker Exemption

The market maker exemption is inserted as section 911(2)(eq) of the Corporations Act. This exemption is available where the following conditions are met:

• the financial service involves making a market for derivatives that are able to be traded on a prescribed licensed market;
• the FFSP provides the financial service from a place outside Australia;
• the FFSP's head office and principal place of business are located at one or more places outside of Australia; and
• the FFSP reasonably believes that providing the same or substantially the same financial service would not contravene any law applying to the head office/principal place of business or the place where the financial service is provided from.

The list of "prescribed financial markets" will be prescribed in the Regulations. It is expected to include Australian domestic licensed markets such as ASX, ASX24 and Cboe.

Conditions attached to the new exemptions – a summary

Funds management relief

Presently, the relief under the ASIC Corporations (Foreign Financial Services Providers—Funds Management Financial Services) Instrument 2020/199 will commence on 1 April 2027. The commencement has been delayed in line with the delay in the introduction of the new legislative exemptions and expiry of the existing exemptions. The relief under that instrument apply to FFSPs engaging in funds management financial services in respect of offshore funds and foreign fund managers, subject to conditions.

For FFSPs with an AFSL – concessions from Fit and Proper tests

Separately to the new exemptions, the Bill also formally introduces concessions from the requirement to satisfy the "fit and proper" test when applying for (or varying) an AFSL to provide financial services to wholesale clients, where a foreign company is authorised, registered, or licensed (as necessary) to legally provide the same or substantially the same financial services by a comparable regulator.

Next steps

With the new exemptions now legislated, it is time to assess (or re-assess) the extent to which an FFSP may be able to rely on them. They come into force in 12 months' time. If not, you may wish to get advice on other exemptions that might be available in the context of your specific business and operating model. It could be the case that an AFSL is required and must be applied for to support the business.