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RG 121 Compliance Guide

Foreign Financial Services Providers

RG 121 COMPLIANCE GUIDE
Foreign Financial Services Providers

This document has been prepared by

THADDEUS MARTIN CONSULTING

© 2025 Thaddeus Martin Consulting. All rights reserved.

RG 121 Scenario Mapping

Practical Guide to Australian Financial Services Licensing Requirements

1
Passive Website – No Active Targeting
Low Risk
Facts
The firm’s website is publicly available, but they do not market, email, or actively solicit Australian investors. Any inbound interest is incidental.
RG 121 Analysis
  • Likely not carrying on business in Australia, as there’s no system or repetition of engagement.
  • No AFS licence or exemption reliance needed.
Risk Assessment
Low (but watch for “reverse solicitation” being tested by ASIC).
2
One-off Mandate with Australian Wholesale Client
Medium Risk
Facts
The firm takes on a single Australian super fund or family office mandate, negotiated offshore.
RG 121 Analysis
  • Courts (e.g. Hungier v Grace, Gebo) suggest even one transaction may equal “carrying on a business.”
  • Relief options:
    • If the client is wholesale/professional → potential reliance on wholesale client exemptions.
    • If transitional relief applies (Singapore = “sufficient equivalence”), the firm may still be covered until 31 Mar 2026.
Risk Assessment
Medium (document rationale carefully).
3
Regular Fundraising from Australian Wholesale Investors
High Risk
Facts
The firm markets its funds to multiple Australian wholesale clients over time.
RG 121 Analysis
  • Clear “carrying on business.”
  • Transitional relief (if opted in) allows this until 31 Mar 2026.
  • After that: need Foreign AFS Licence (RG 176) or new exemption (Professional Investor or Comparable Regulator Exemption).
Risk Assessment
High unless transition plan in place.
4
Partnership with Australian AFS Licensee
Moderate-Low Risk
Facts
The firm teams up with an Australian fund manager or platform that holds an AFS licence. All client dealings are through that entity.
RG 121 Analysis
  • May rely on services provided to/through a licensee exemption.
  • The firm seen as “outsourced manager” rather than directly carrying on business.
Risk Assessment
Moderate–Low (but ensure contractual protections + clear disclosure of role).
5
Digital Platform Access
Very High Risk
Facts
The firm offers its fund via an online portal that Australians can log into directly.
RG 121 Analysis
  • ASIC case law (Facebook Inc v ASIC) → digital engagement counts as carrying on business in Australia, regardless of physical presence.
  • Must rely on exemptions or licence.
Risk Assessment
Very High (digital access = high visibility).
6
Delegated Investment Management
Low-Medium Risk
Facts
An Australian AFS licensee appoints the firm as sub-investment manager under an IMA. The firm never contracts directly with Australian clients.
RG 121 Analysis
  • Generally falls under ‘providing services to a licensee’ exemption.
  • Still need to ensure AML/CTF and outsourcing responsibilities are met.
Risk Assessment
Low–Medium (dependant on how “back-to-back” authority is structured).

Compliance Decision Checklist

STEP 1

Are We Carrying On Business in Australia?

Do we have Australian clients or investors?
Do we actively market to Australian residents?
Do we have repeat dealings with Australian parties?
Do we provide digital access to Australians?
Have we executed even one transaction with an Australian party?
If ANY boxes checked → Likely carrying on business → Proceed to Step 2
If NO boxes checked → Not carrying on business → No AFS licence required
STEP 2

Which Exemption Might Apply?

Transitional Relief: Are we from Singapore/Hong Kong/US/UK/Germany AND opted in before 31 Mar 2022?
Wholesale Only: Are ALL our Australian clients wholesale/professional investors?
Through Licensee: Do we only provide services through an AFS licensee?
Professional Investor Exemption: (Post-2026) Will all clients meet enhanced professional investor criteria?
Comparable Regulator: (Post-2026) Are we regulated by MAS/FCA/SEC?
Document which exemption(s) apply → Proceed to Step 3
If NO exemptions apply → Need Foreign AFS Licence
STEP 3

Documentation Requirements

Client classification evidence (wholesale certificates, accountant letters)
Written rationale for exemption reliance
Legal opinion on licensing position (recommended)
Transitional relief opt-in confirmation (if applicable)
AFS licensee agreement (if relying on “through licensee” exemption)
Board resolution approving Australian activities
Compliance procedures for ongoing monitoring
Maintain all documentation → Review quarterly → Update as regulations change

Critical Dates

Transitional Relief Expires
31 March 2026
Foreign AFS Licence Applications
Now Available
New Exemptions Commence
1 April 2026

Essential Resources & Guidance

📋 Official ASIC Regulatory Guides

RG 121: Doing financial services business in Australia

Core guidance on when foreign entities need an AFS licence. Covers “carrying on business” tests, territorial nexus, and exemptions.

View Guide →

RG 176: Foreign financial services providers

Detailed requirements for Foreign AFS Licence applications, including eligibility criteria and ongoing obligations.

View Guide →

INFO 252: Foreign AFS licensing regime

Information sheet on the new licensing framework, transitional arrangements, and post-2026 pathways.

View Info Sheet →

🔧 Implementation & Best Practices

Foreign AFS Licence Application Guide

Step-by-step process: prepare core proofs (A1-A5), draft business description, complete Form FS03, pay fees ($8,657), 150-day assessment.

Wholesale Client Verification

Acceptable evidence: accountant certificates (s761G), AFSL holder certificates, $10M net assets test, control test documentation.

Transitional Relief Checklist

Confirm opt-in by 31 Mar 2022, maintain “sufficient equivalence” home regulation, prepare post-2026 transition plan.

⚖️ Key Legal Precedents

Valve Corporation v ACCC [2017] FCAFC 224

Federal Court: Foreign digital companies can carry on business in Australia without physical presence. Key factors: substantial Australian revenue, local customer base, targeted engagement. High Court confirmed by dismissing special leave application in 2018.

Francis Travel Marketing v Virgin Atlantic Airways (1996) 39 NSWLR 160

NSW Court of Appeal: Established foundational test – carrying on business requires continuous, repetitive commercial acts for profit. Still regularly cited in modern decisions.

Section 911D Corporations Act 2001

Statutory test: Financial services business carried on in Australia if provider induces Australian residents to use financial services – broader than general “carrying on business” test. This is the primary legal framework, not case law.

Note on Case Law Application

The application of case law to specific circumstances can be complex. Legal advice should be sought for particular situations, especially given evolving judicial interpretation of digital business models.

Post-2026 Compliance Pathways

Option 1: Foreign AFS Licence

  • Available now for applications
  • 150-day assessment period
  • Tailored for wholesale only

Option 2: Professional Investor

  • Starts 1 April 2026
  • Enhanced investor criteria
  • Annual attestations required

Option 3: Comparable Regulator

  • For MAS/FCA/SEC regulated
  • Notification process only
  • Home regulator standing required

Quick Reference: Key Thresholds & Definitions

Category Threshold/Definition Evidence Required
Wholesale Client – Net Assets $2.5 million net assets Accountant certificate (within 6 months)
Wholesale Client – Income $250k gross income (2 years) Accountant certificate (within 6 months)
Professional Investor $10M assets OR controls $10M AFSL holder certificate
Large Investment $500,000 minimum Transaction documentation
Listed Entity ASX-listed or equivalent Company search/market listing

Key Takeaways

Do nothing = safe – if no Australian engagement.
One-off deal = risky – still may trigger licensing.
Fundraising = licence or exemption – plan for post-2026.
Best medium-term path: Rely on transitional relief until 31 Mar 2026, then apply for a Foreign AFS Licence or shift into the new exemption regime.
Document everything – rationale, client classification, reliance on exemptions.
This guide is for general information purposes only and does not constitute legal advice. Please consult with qualified legal counsel for specific situations.

© 2025 Thaddeus Martin Consulting. All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means without the prior written permission of Thaddeus Martin Consulting.