FFSP Reforms Reintroduced in the 2025 Treasury Laws Amendment Bill for Foreign Financial Service Providers

Introduction

After the lapse of previous legislation, the Australian Government has reintroduced long-awaited reforms for foreign financial service providers (FFSPs). These crucial reforms are now contained within Schedule 2 of the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth), which was introduced to Parliament on 26 November 2025, functionally replacing the failed 2023 bill.

This development signals a renewed commitment to establishing a permanent framework for FFSPs, addressing the regulatory uncertainty many FFSPs have faced. For foreign banks, asset managers, and offshore exchanges, this guide provides essential details on the proposed licensing exemptions and the strategic decisions required before the current transitional relief expires on 31 March 2026.

Understanding the New FFSP Legislation & the Genetic Testing Bill

Schedule 2: The FFSP Reform Details

On 26 November 2025, the Australian Government introduced the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth) to Parliament. This legislation serves as an omnibus bill, combining several unrelated government measures into a single legislative package.

The reforms for FFSPs are contained within Schedule 2 of this bill, titled “Licensing exemption for foreign financial service providers.” While the bill’s main title focuses on genetic testing protections in life insurance, Schedule 2 amends the Corporations Act 2001 (Cth) to establish a new statutory exemption regime for FFSPs providing financial services to wholesale clients in Australia.

Replacing the Lapsed 2023 FFSP Bill

This new bill functionally replaces previous legislative efforts that failed to pass through Parliament, leaving FFSPs in regulatory uncertainty.

The reforms in Schedule 2 substantially replicate the provisions that were in earlier bills, including:

• the Treasury Laws Amendment (Better Targeted Superannuation Concessions and Other Measures) Bill 2023 (Cth)
• the subsequent Treasury Laws Amendment (Miscellaneous Measures) Bill 2024 (Cth)

Those earlier bills lapsed before becoming law due to the parliamentary schedule and the calling of the 2025 Federal Election.

The introduction of the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth) represents the Government’s renewed commitment to enacting these long-awaited FFSP licensing exemptions.

The 3 New FFSP Licensing Exemptions Explained

Professional Investor Exemption for Offshore Providers

The Professional Investor Exemption allows an FFSP to provide financial services from outside Australia without holding an Australian Financial Services Licence (AFSL). This exemption is strictly limited to services offered to clients who meet the definition of “professional investors” under section 9 of the Corporations Act 2001 (Cth). To qualify, the FFSP’s head office and principal place of business must be located outside Australia.

While this exemption requires services to be provided from offshore, it permits limited marketing visits. Key conditions associated with this exemption include:

Condition	Requirement
Marketing Visit Cap	Representatives are allowed to conduct marketing visits in Australia for up to 28 calendar days per financial year.
No Physical Presence	The FFSP cannot maintain a continuous physical presence or staffed office in Australia.
Home Jurisdiction Compliance	The provider must reasonably believe that dealing in a financial product does not breach any laws in its home jurisdiction.
ASIC Notification	The FFSP must ensure it has adequate oversight of its representatives, such as an authorised representative, who must be properly trained and competent.
Submission to Jurisdiction	The provider must agree to the non-exclusive jurisdiction of Australian courts for legal proceedings initiated by ASIC or another Commonwealth authority.

Comparable Regulator Exemption for Foreign Banks & Managers

The Comparable Regulator Exemption is designed for FFSPs that are already authorised and licensed by an overseas regulator considered “comparable” to Australia’s. This exemption allows these entities to provide financial services to wholesale clients in Australia without obtaining a full AFSL.

Unlike the Professional Investor Exemption, it offers greater flexibility by permitting onshore business activities. Regulators from jurisdictions such as the United States Securities and Exchange Commission (SEC), the United Kingdom Financial Conduct Authority (FCA), Singapore Monetary Authority of Singapore (MAS), and Hong Kong Securities and Futures Commission (SFC) are expected to be on the approved list.

In addition to the conditions of the Professional Investor Exemption, providers using this relief must meet stricter compliance requirements, including:

Additional Requirement	Description
Appointing a Local Agent	An agent must be maintained in Australia to accept service of legal documents.
Information Sharing	The FFSP must consent to information sharing between ASIC and its home regulator.
Enforcement Notifications	ASIC must be notified of any significant enforcement actions or AFSL investigations commenced by any regulator in any jurisdiction.
Oversight of Representatives	The FFSP must ensure it has adequate oversight of its representatives, who must be properly trained and competent.

Market Maker Exemption for Derivatives Traders

The Market Maker Exemption provides targeted relief for foreign entities engaged in the specific activity of making a market for derivatives. This narrow exemption applies only to derivatives that can be traded on a prescribed licensed market in Australia, such as the Australian Securities Exchange (ASX).

It is designed to support liquidity providers on major exchanges rather than to facilitate general over-the-counter dealing. This exemption is not a broad substitute for a licence and is highly specialised.

For instance, it offers limited benefits to most offshore crypto exchanges, as it does not cover the operation of their own offshore order books unless those platforms are prescribed Australian licensed markets. FFSPs relying on this exemption must still notify ASIC of their activities and ensure they provide their financial services efficiently, honestly, and fairly.

Timeline & Strategy: Managing the March 2026 Cliff Edge

Expiry of Current ASIC Transitional Relief

The current transitional relief instruments that many FFSPs rely on are set to expire on 31 March 2026. This deadline applies to both the “sufficient equivalence relief” and the “limited connection relief,” which were extended by ASIC through the ASIC Corporations (Amendment) Instrument 2024/497 (Cth).

This impending date creates a significant “cliff edge” risk for the financial services industry. If the new legislative framework is not passed and implemented before this date, and if ASIC does not grant a further extension, many FFSPs could find themselves unable to lawfully provide financial services to wholesale clients in Australia.

The uncertainty is heightened by ASIC’s official position, which, as of a November 2025 update, stated that it would announce its decision on extending the relief “closer to the expiry date.” As a result, FFSPs are left in a precarious position, needing to plan for a potential hard stop to their current arrangements.

Anticipated Extension to March 2027 & Commencement Dates

Despite the uncertainty, there is a widespread expectation across the industry that ASIC will extend the transitional relief period to 31 March 2027. This anticipated extension is considered necessary to bridge the timing gap between the current expiry date and the commencement of the new FFSP regime proposed in the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth).

The new licensing exemptions outlined in the Bill are scheduled to come into force 12 months after the Bill receives Royal Assent. Given that the Bill was introduced to Parliament in late November 2025, it must still pass through both houses, a process that could take several months.

A 12-month commencement period following Royal Assent means the new regime would likely not be operational until late 2026 or early 2027 at the earliest. Therefore, an extension of the current relief is crucial to ensure a seamless transition and avoid a regulatory vacuum that would disrupt the provision of financial services in Australia.

Action Plan for Foreign Banks & Offshore Crypto Exchanges

Strategy for Entities from Comparable Regulator Jurisdictions

FFSPs regulated in jurisdictions expected to be deemed “comparable,” such as the United States (SEC), United Kingdom (FCA), Singapore (MAS), and Hong Kong (SFC), should adopt a “wait and prepare” strategy. Rather than immediately applying for a Foreign Australian Financial Services Licence, these firms are advised to prepare to rely on the new Comparable Regulator Exemption once the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth) is passed.

To effectively prepare for this transition, entities should take several proactive steps:

Action Step	Details
Map Your Client Base	Identify all Australian clients and classify them as professional, wholesale, or retail to ensure services align with the exemption criteria, which is limited to wholesale clients.
Compile Regulatory Evidence Pack	Assemble documentation that proves your regulatory status in your home jurisdiction, including licenses, supervisory contacts, compliance frameworks, and regulatory filings.
Design for the Exemption	Plan operations around the requirements of the Comparable Regulator Exemption, including preparing to appoint a local agent and establishing procedures for notifying ASIC of enforcement actions.
Monitor Legislative Progress	Keep a close watch on the Bill’s passage through Parliament and any announcements from ASIC regarding the extension of transitional relief beyond the current 31 March 2026 deadline.

Strategy for Entities from Non-Comparable Jurisdictions

For FFSPs from jurisdictions not expected to be on the “comparable regulator” list, such as the Seychelles, British Virgin Islands (BVI), or certain offshore crypto hubs, the recommended strategy is to “act now.” These entities are unlikely to benefit from the Comparable Regulator Exemption and should not wait for the new legislation to pass.

The most prudent course of action is to begin the AFSL application process for a Foreign AFSL or a standard AFSL immediately. These firms may still be able to use the Professional Investor Exemption, but only if they meet its strict conditions, which include:

Condition	Limitation / Requirement
Service Location	Financial services must be provided exclusively from outside Australia.
Client Type	Services are restricted to “professional investors” as defined under section 9 of the Corporations Act 2001 (Cth).
Onshore Activity	Adherence to limitations on marketing visits is required, with a cap of 28 days per financial year.

Since this offshore-only model does not suit many business plans, pursuing a full licence is the safer path to ensure continued access to the Australian market. These FFSPs should treat the 31 March 2026 expiry of current transitional relief as a hard deadline and plan their licensing strategy accordingly.

Using the Fit & Proper Person Test Exemption

A significant advantage for FFSPs from comparable regulator jurisdictions is the inclusion of a fit-and-proper person test exemption in the proposed reforms. This provision is designed to fast-track the licensing process for these entities if they choose or need to apply for a Foreign AFSL or a standard AFSL.

This exemption allows an FFSP regulated by an authority like the SEC or FCA to leverage its existing regulatory standing. Instead of undergoing an entirely new vetting process, ASIC can rely on the home regulator’s assessment, significantly streamlining the application.

This fast-track option provides valuable strategic flexibility, allowing a firm to pivot from relying on an exemption to obtaining a full licence more efficiently if its business in Australia expands.

Conclusion

The reintroduction of FFSP reforms in the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Bill 2025 (Cth) provides a clearer regulatory path, establishing three key licensing exemptions for FFSPs. This development requires foreign banks, asset managers, and offshore exchanges to strategically assess their eligibility and decide whether to rely on the new exemptions or pursue a licence before the current transitional relief expires.

Navigating these legislative changes requires careful planning to ensure your operations remain compliant and can transition smoothly to the new regime. To understand how these reforms impact your business and to develop a clear strategy, contact our experienced AFSL compliance lawyers at AFSL House for specialised guidance tailored to your specific circumstances.

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