If you are a business that provides financial services and financial products then you are generally required under the Corporations Act 2001 (Cth) to hold an Australian financial services licence (AFSL). However, there are some exemptions that may apply and allow you to operate without an AFSL.
For more information on who is required to hold an AFSL see ‘Who Uses an AFSL?’. It is important to note that if you are required to hold an AFSL it is an offence to operate without one.
What are the AFSL Exemptions?
There are a number of different exemptions to the requirement to hold an AFSL. Chapter 7 of the Corporations Act 2001 (Cth), the Corporations Regulations or a class order relief granted by ASIC provide the exemptions to the requirement.
Exemptions are available for:
- foreign financial service providers (until 31 March 2023)
- financial counselling agencies
- foreign collective investment schemes
- businesses carried out in connection with an AFS licensee
- when the financial services business is not the only or main focus of the activity
- financial services that only involve the financial services provider
- when the financial service is under the authority of an alternative regulatory regime
Foreign Financial Service Providers
Prior to 1 April 2020, ASIC provided two types of exemptions to foreign financial service providers (FFSP) that provided financial services to Australian wholesale clients. The two exceptions are the:
- Sufficient equivalence relief (also known as passport relief) – if ASIC considers the overseas regulatory regime to be sufficiently equivalent to the Australian AFSL regime.
- Limited connection relief – if the FFSP is carrying on the business in Australia only because it is intending to induce a person in Australia to use their services.
However, these two exemptions have since been repealed. ASIC has implemented transitional arrangements to allow FFSPs time to make a decision on their next step. The transitional relief was originally available until 31 March 2022, which was then extended to 31 March 2023.
From 1 April 2023, if a FFSP wants to continue providing financial services to Australian wholesale clients they must hold a foreign or standard AFSL unless any other exemptions or the funds management relief applies.
The Treasury has been undertaking a consultation on the FFSP licensing relief and released a Exposure Draft Legislation introducing some new exemptions. However, as this is only a draft that has not yet been implemented, none of the exemptions in the draft currently apply.
Financial Counselling Agencies
ASIC Corporations (Financial Counselling Agencies) Instrument 2017/792 provides financial counselling agencies with an exemption to holding an AFSL. A financial counselling agency is an agency that gives free and independent financial counselling and advice to assist those in financial difficulty.
Financial counselling agencies are exempt if they:
- do not charge the client a fee or take any remuneration;
- take the reasonable steps to guarantee that their financial counsellors are members of, or are eligible to be members of a financial counselling association;
- take the reasonable steps to guarantee that their financial counsellors have the appropriate training;
- do not provide or participate in a financial services business; and
- take the reasonable steps to guarantee their staff does not provide or participate in a financial services business.
This exemption does not apply to rural financial counselling agencies.
For more information on whether an exemption applies to your business please contact 1300 337 997 or fill out the form on this page.