The Australian Securities and Investment Commission (ASIC) has extended, for a further 12 months, the transitional relief for foreign financial services providers (FFSPs) from the requirement to hold an Australian financial services (AFSL) when providing financial services to Australian wholesale clients.
The current transitional arrangements for ASIC’s "sufficient equivalence relief" and "limited connection relief" were due to expire on 31 March 2025. The further extension means the relief will last until 31 March 2026.
The development of the FFSP licensing regime
Generally, if a business or person carries on a financial services business in Australia, they will need to hold an AFSL, unless licensing relief is granted by ASIC or an exemption applies.
Before March 2020, ASIC had assessed that a number of overseas regulatory regimes - were each a "sufficiently equivalent jurisdiction" to the Australian regulatory regime. As a result, ASIC granted a blanket relief (i.e. via class orders) for entities regulated in these jurisdictions from the need to also apply for an AFSL, when they provided financial services to wholesale clients in Australia.
In 2020, ASIC tried to repeal this blanket sufficient equivalence relief and introduced a foreign AFSL option for FFSPs who provides certain financial services to wholesale clients in Australia. Under that proposed FFSP licensing regime, FFSPs licensed in a sufficiently equivalent jurisdiction could individually apply for a foreign AFSL from ASIC, and be exempted from many of the standard AFSL obligations (essentially a fast-tracked, modified licensing regime). However, ASIC has allowed FFSPs that were able to rely on the sufficient equivalence relief on 31 March 2020 to continue to rely on the relief until 31 March 2026, after which they must apply for foreign AFSLs.
In addition, ASIC also tried to replace a then-applicable "limited connection relief" with a narrower relief which applies to fund management FFSPs seeking to induce certain types of professional investors in Australia to invest in their funds, a so-called "funds management relief". This relief is now scheduled to be available from 1 April 2026 (though by then it may be superseded by the licensing exemptions under the bill below).
Exemption to FFSP Licensing regime
Since introducing the FFSP licensing regime, the Australian Government has been working on a legislation to introduce 4 new exemptions for FFSPs from the need to apply for an AFSL, with an aim to reduce barriers to entry for FFSPs in Australia:-
a comparable regulator exemption;
a professional investor exemption;
a market maker exemption; and
an exemption from the fit‑and‑proper person assessment to fast‑track the licensing process for FFSPs authorised to provide financial services in a comparable regulatory regime.
After experiencing significant delays in the past few years, the draft bill - Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (Bill) is before Parliament. Subject to the draft being passed, the above exemptions are set to commence on 1 April 2025.
Extension of transitional relief
Given the long and bumpy law-making process for the FFSP regime and its exemptions in Parliament, ASIC has repeatedly extended the sufficient equivalence relief and the limited connection relief (compared to the upcoming fund management relief, this applies to a broader range of both FFSPs and wholesale investors) since 2020. These apply to FFSPs that wish to provide financial services to wholesale clients or professional investors in Australia. They have been in place since before the introduction of the foreign AFSL regime, and many FFSPs have been relying on them in the past years, despite being technically "transitional".
The latest extension of transitional reliefs to 31 March 2026 will allow Parliament further time to consider the Bill, which will then offer the new licensing exemptions to replace the transitional relief.
ASIC said the extension was necessary to:
provide certainty for FFSPs that are currently relying on ASIC relief
After 31 March 2026, FFSPs currently relying on the transitional reliefs will be required to notify ASIC of their intention to rely on the new licensing exemptions, unless they choose to notify ASIC earlier.
Entities that are not currently subject to ASIC relief will be able to notify ASIC of their reliance on the licensing exemptions after they commence.
By J Huang, S Pettigrove and M Bacina
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