Foreign firms tap Aussie investment market

Upcoming regulatory changes to foreign financial services providers could change the way that offshore managers enter Australia. New legislation from ASIC will introduce new statutory FFSP licensing exemptions from 8 April 2027, meaning they do not have to hold an Australian Financial Services Licence (AFSL).

Professional Investor Exemption

The professional investor exemption will allow eligible offshore firms to provide financial services to Australian ‘professional investors’ from outside Australia, subject to several conditions. These include the person providing the financial services being located outside of Australia, the head office being located outside Australia and the person reasonably believing providing the same or substantially the same financial service does not contravene any law applying in the person’s principal place of business.

A professional investor is defined as an institutional or regulated body or large asset holders with at least $10 million. This is a narrower definition than the existing ‘wholesale client’ category which has a minimum asset level of $2.5 million or gross income of $250,000.

Marketing Visits and Comparable Regulator Exemption

The new rules also permit representatives to undertake limited marketing visits to Australia with a 28-day limit per person including weekends and public holidays. The exemption will cease once a representative has exceeded this limit. A second ‘comparable regulator exemption’ will apply where the person is authorised, registered, or licensed by a “comparable regulator” to legally provide the same or substantially the same financial service in a place outside Australia.

Companies must notify ASIC of their intention to rely on the exemption and is likely to include regulators such as the Financial Conduct Authority (FCA) in the UK, Securities and Futures Commission (SFC) in Hong Kong and Monetary Authority of Singapore (MAS).

According to the report, offshore fund managers should begin reviewing their position now rather than waiting until the final months of the transition. For many offshore fund managers, the new regime should provide a workable basis for continuing to provide financial services in Australia. However, it is essential to note that the new exemptions are not simply a continuation of the existing arrangements.

Considerations include which exemption best aligns with their current and planned Australian activities, whether their current and prospective Australian investors satisfy the relevant investor definitions, and whether their existing marketing and servicing model remains permissible. They must also consider the new ASIC and client notification requirements, Australian agent and other ongoing compliance obligations, and whether an alternative licensing structure may be required.

Recent new entrants to the Australian market include RBC BlueBay, Aegon Asset Management, and Royal London Asset Management.

Implications for Offshore Fund Managers

Offshore fund managers should start preparing now to ensure a smooth transition.
By understanding the new exemptions and their implications, these managers can continue to provide financial services to Australian investors and expand their presence in the market.

The new rules will come into effect on 8 April 2027.