Exemptions to the AFSL Requirement for Australian Financial Service Providers

A person who carries on a financial services business in Australia must hold an Australian financial services licence (AFSL) under Section 911A of the Corporations Act 2001 (Cth) (‘Corporations Act‘). Narrow statutory exemptions under subsection 911A(2) allow certain domestic companies, foreign financial service providers, and specialised agencies to provide financial services without holding their own AFSL.

These exemptions cover arrangements such as authorised representatives, related bodies corporate, self-dealing, and financial counselling agencies. Service providers who understand the scope and conditions of each exemption can operate lawfully while avoiding the full regulatory burden of an AFSL.

Interactive Tool: See If You Qualify for an AFSL Exemption

What the AFSL Requirement Covers & Why Exemptions Exist

What Constitutes a Financial Service & a Financial Product

A financial service involves selling, dealing in, or providing financial advice connected to financial products. In addition, this includes making a market for a financial product and providing services such as crowdfunding, superannuation trustee services, and insurance services.

Financial products are instruments that a person acquires to make a financial investment, manage financial risks, borrow money, or save money. They include:

• Securities such as shares, bonds, and debentures
• Interests in managed investment schemes
• Derivatives
• Non-cash payment facilities
• Life insurance

When the Requirement to Hold an AFSL Applies Under the Corporations Act

Under Section 911A(1) of the Corporations Act, any person carrying on a financial services business in Australia must hold an AFS licence covering the provision of those financial services, a complex area where advice from AFSL lawyers is often essential. This default rule applies broadly to all entities engaged in financial services.

Subsection 911A(2) of the Corporations Act sets out a series of narrow exemptions from this requirement. These exemptions allow certain providers to operate without holding their own AFSL in specific, limited circumstances where the financial services are restricted in scope or where adequate regulatory oversight already exists.

Domestic Exemptions for Australian Financial Service Providers

Operating as an Authorised Representative of an AFSL Holder

Under Section 911B of the Corporations Act, an unlicensed entity can provide financial services by acting as an authorised representative of an existing AFSL holder. The principal licensee assumes full regulatory and civil liability for the representative’s conduct.

The authorised representative is subject to several key constraints:

• The representative must operate strictly within the scope of the principal’s AFSL and cannot issue or dispose of financial products;
• A formal authorised representative agreement should define the permitted services; and
• The principal bears the legal obligation to monitor and supervise the representative’s compliance.

Self-Dealing & Related Body Corporate Exemptions

The Corporations Act provides two key exemptions in this area:

• Self-dealing exemption (Section 766C(4)(c)): Allows a company to issue, vary, or dispose of its own securities without holding an AFSL. This relief is limited to fundamental corporate capital-raising events and does not extend to companies carrying on a business of investing in securities while offering those investments to the public.
• Related bodies corporate exemption (Section 911A(2)(i)): Permits an entity to provide financial services exclusively to related bodies corporate, such as subsidiaries, parent companies, or sister corporations, without requiring a licence. This exemption covers internal treasury operations, corporate restructuring, and centralised group investment management within a defined corporate group structure.

Intermediary Authorisation for Unlicensed Product Issuers

Under Section 911A(2)(b) of the Corporations Act, an unlicensed product issuer can issue, vary, or dispose of financial products through a formal arrangement with an AFSL holder. The licensed intermediary or its authorised representatives must make the offers to clients to arrange those transactions.

However, this exemption is subject to several important limitations:

• The product provider must be a separate entity from the person making the offers;
• The exemption does not apply to margin lending facilities;
• A trustee cannot rely on it to issue interests in an unregistered scheme for which they serve as trustee; and
• The offer must be covered by the AFSL holder’s licence.

The Small-Scale “2/20” Exemption for Early-Stage Fund Managers

Early-stage syndicates can raise up to $2 million from a maximum of 20 distinct investors within a rolling 12-month window without holding an AFSL. This narrow exemption allows fund managers to test investment strategies before committing to the full licensing regime.

However, the operator cannot charge management fees, performance fees, or any financial compensation for their services. Charging a fee triggers the legal definition of carrying on a financial services business, which instantly voids the exemption and exposes the operator to the requirement to hold an AFSL.

Exemptions for Foreign Financial Service Providers

The Comparable Regulator Exemption for Wholesale Clients

The comparable regulator exemption was introduced by the Treasury Laws Amendment (Genetic Testing Protections in Life Insurance and Other Measures) Act 2026 (Cth) (‘2026 amending Act‘) and takes effect on 9 April 2027. It permits foreign companies or partnerships formed outside Australia to provide financial services strictly to wholesale clients without holding an AFSL.

The entity must be authorised, registered, or licensed by an approved overseas comparable regulator to provide the same or substantially the same financial service overseas. Approved comparable regulators include the US SEC/FINRA, UK FCA, German BaFin, and Singapore MAS.

Entities relying on this exemption must notify the Australian Securities and Investments Commission (ASIC) of their intention and comply with several conditions:

• submitting to Australian court jurisdiction in proceedings brought by ASIC or a Commonwealth authority;
• consenting to information sharing between ASIC and each comparable regulator;
• notifying ASIC of significant enforcement action, disciplinary action, or investigation by any overseas regulator; and
• maintaining an agent in Australia.

The Professional Investor & Market Maker Exemptions

Existing sufficient equivalence relief and limited connection relief for foreign financial service providers expire on 31 March 2027. Two further statutory exemptions under the same 2026 amending Act take effect on 9 April 2027.

The professional investor exemption is available where services are provided only to professional investors from outside Australia, with the provider’s head office and principal place of business located overseas. The market maker exemption applies to foreign entities making a market in derivatives on a prescribed licensed financial market, also operating from outside Australia. Both exemptions share common conditions:

• notifying ASIC of the intention to rely on the exemption;
• complying with reasonable requests for assistance from ASIC; and
• doing all things necessary to ensure financial services are provided efficiently, honestly, and fairly.

Specialised & Public-Interest Exemptions

Financial Counselling Agencies

Financial counselling agencies that assist individuals and small businesses in financial difficulty are exempt from the requirement to hold an AFSL. These non-profit organisations provide free counselling and advocacy services covering debt, budgeting, and credit matters.

Several strict conditions apply under the Corporations Act and the Corporations Regulations:

• Services must be provided entirely free of charge.
• Counsellors must be members of, or eligible for membership in, a relevant state or territory financial counselling association and must receive adequate training.
• The agency cannot provide any other financial services beyond the specified counselling.

The exemption covers financial product advice on deposit products, non-cash payment facilities, insurance products, and superannuation. It also extends to assisting clients with insurance claims.

Technology Suppliers & General Advice Publishers

A business that supplies technology-based services to a financial services business without directly offering financial services to customers may not require an AFSL. Whether the exemption applies depends on the specific services provided and the contractual agreement with the financial services business.

Separate exemptions under the Corporations Act cover general financial product advice published in widely available media. Under Section 911A(2)(ea) of the Corporations Act, general advice in a publicly available newspaper or periodical is exempt when the sole or principal purpose of the publication is not the provision of financial product advice.

Subsections 911A(2)(eb) and (ec) of the Corporations Act extend similar relief to:

• broadcasts and transmissions made via an information service; and
• sound, video, or data recordings made available to the public,

subject to the same purpose test.

Conditions, Limitations & Risks of Relying on an AFSL Exemption

Notification & Ongoing Compliance Obligations

Exempt providers must still comply with the broader framework of the Corporations Act, including market conduct rules, disclosure obligations, and consumer protection laws. Authorised representatives bear additional duties, including product disclosure requirements and the obligation to refrain from market misconduct and misleading or deceptive conduct. As noted above, the principal AFSL holder remains legally responsible for monitoring and supervising the representative’s compliance.

Foreign financial service providers (FFSPs) relying on the comparable regulator, professional investor, or market maker exemptions must notify ASIC of their intention and observe the specific conditions detailed in the sections above. Those relying on the comparable regulator exemption must also notify ASIC of any significant enforcement action, disciplinary action, or investigation by an overseas regulator, maintain an agent in Australia, and submit to the non-exclusive jurisdiction of Australian courts — each of which is a condition of that exemption.

Consequences of Exceeding the Scope of an Exemption

Operating outside the scope of an exemption means providing financial services without proper authorisation, which constitutes a breach of the Corporations Act. This can result in significant penalties and enforcement action by ASIC, including formal investigations into the provider’s activities.

ASIC has several enforcement powers where a provider fails to comply with exemption conditions:

• ASIC has the power to cancel exemptions or impose additional conditions where a provider fails to comply.
• Under the new FFSP regime, ASIC may apply to the court for a civil penalty and pecuniary penalty order for non-compliance with conditions attached to the comparable regulator, professional investor, or market maker exemptions.
• Failing to maintain compliance with exemption conditions can also result in the loss of exemption eligibility entirely.

Conclusion

The Corporations Act provides narrow exemptions from the requirement to hold an AFSL for domestic companies, FFSPs, and specialised agencies such as financial counselling organisations. Each exemption carries strict conditions, and exceeding its scope can expose a business to significant penalties and enforcement action by ASIC.

Understanding which exemption applies to your circumstances is essential to operating lawfully and avoiding regulatory risk. For tailored guidance on AFSL exemptions and compliance, contact Click Legal today. Our specialist AFSL lawyers provide clear, practical advice to help financial service providers navigate their obligations under the Corporations Act with confidence.

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