ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121

Explanatory Statement

ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121

This is the Explanatory Statement for ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121 (Instrument).

The Explanatory Statement is approved by the Australian Securities and Investments Commission (ASIC).

Summary

1.              The Instrument exempts foreign companies that hold an Australian financial services licence (foreign licensees) from certain financial reporting and record keeping obligations, as well as the requirement to lodge financial statements and have them audited, under Division 6 of Part 7.8 of the Corporations Act 2001 (Act), subject to meeting certain conditions. These obligations may be disproportionately burdensome as registered foreign companies are subject to financial reporting obligations under subsection 601CK(1) of the Act.
2.              The Instrument also exempts foreign licensees that are authorised deposit-taking institutions (foreign ADIs) from the requirement to hold an Australian financial services (AFS) licence for the provision of financial services which consist only of limited dealings in derivatives and/or foreign exchange (FX) contracts on their own behalf. The Instrument provides this exemption in circumstances where the AFS licensing obligation would be disproportionately burdensome and lead to inconsistent regulatory outcomes.

Purpose of the instrument

1.              The Instrument remakes relief previously provided in ASIC Corporations (Foreign Licensees and ADIs) Instrument 2016/186 (Instrument 2016/186).
2.              Division 6 of Part 7.8 of the Act requires AFS licensees to prepare and lodge audited financial statements and to keep financial records in relation to their financial services businesses. These obligations apply to all AFS licensees regardless of where they are incorporated or where they carry on their businesses.
3.              Subsection 601CK(1) of the Act requires registered foreign companies to lodge financial statements with ASIC, which have been prepared in accordance with the laws of the company’s place of origin. The company is also required to lodge a statement in the prescribed form verifying that the copies are true copies of the documents.
4.              The Instrument exempts foreign licensees, including foreign ADIs, from certain financial reporting and record keeping obligations under Division 6 of Part 7.8 of the Act, subject to conditions that mirror subsection 601CK(1) of the Act, on the basis that these obligations may be disproportionately burdensome. In particular:

1.    The financial reporting and record keeping obligations under Part 7.8 of the Act apply to the whole of a foreign company, not just their operations in Australia (which are often a relatively small part of their business).
2.    ASIC already has access to financial information about registered foreign companies operating as foreign licensees in Australia under subsection 601CK(1) of the Act. Imposing the financial reporting obligations under Division 6 of Part 7.8 on foreign licensees would impose duplicate reporting obligations with minimal regulatory benefit.

1.              Subsection 911A(1) of the Act provides that a person who carries on a financial services business in this jurisdiction must hold an AFS licence covering the provision of the financial services.
2.              The Australian financial services regulatory regime does not generally require persons who transact solely on their own behalf to hold an AFS licence. Subsection 766C(3) of the Act provides that a person is taken not to ‘deal’ in a financial product if the person deals on their own behalf, unless the person is an issuer of the product. Persons who deal in derivatives or FX contracts on their own behalf cannot rely on this carve-out as they are taken to be the ‘issuer’ of the product.
3.              Regulation 7.6.01(m) of the Corporations Regulations 2001 (Regulations) provides an exemption from the requirement to hold an AFS licence where a person provides financial services which consist only of limited dealings in derivatives and/or FX contracts, provided that dealings in derivatives or FX contracts are not a significant part of the person's business. Foreign ADIs are unable to rely on this exemption where the relevant dealing/s constitute a significant part of the foreign ADI’s business.
4.          The relief under the Instrument exempts foreign ADIs from the requirement to obtain an AFS licence when dealing in derivatives and/or FX contracts on their own behalf in limited circumstances. The conditions of the relief mirror the exemption in regulation 7.6.01(m) of the Regulations, except that the condition that dealings in derivatives or FX contracts are not a significant part of the business is replaced with a condition that the counterparty for the dealing is a wholesale client. This ensures that the relief does not increase the risk of harm to retail clients.
5.          In these circumstances, the requirement to obtain an AFS licence would be excessive and would lead to inconsistent regulatory outcomes because it would:

1.    impose a significant regulatory burden on foreign ADIs with little or no regulatory benefit;
2.    be inconsistent with the principle that persons who transact solely on their own behalf are not generally required to hold an AFS licence, which underpins the carve-out in subsection 766C(3) of the Act; and
3.    be inconsistent with the AFS licensing exemption in regulation 7.6.01(m) of the Regulations, leading to inconsistent regulatory outcomes.

1.          The Instrument also repeals Instrument 2016/186.

Consultation

1.          Before making the Instrument, ASIC undertook a streamlined public consultation inviting feedback on a proposal to remake the relief under Instrument 2016/186 as set out in CS 40 Proposed remake of relief instruments for AFS licensees and overseas banks. The consultation ran from 4 December 2025 to 23 January 2026 and involved the publication of a news item and a consultation webpage on ASIC’s website attaching a draft legislative instrument.
2.          Under the proposal, the relief in Instrument 2016/186 remained largely unchanged, other than an amendment to a condition of the financial reporting and record keeping relief. The condition requiring that the foreign licensee ‘reasonably believes’ that the auditor’s report was prepared in accordance with the laws of the foreign licensee’s place of origin was replaced with a requirement that the auditor’s report include a statement that the auditor reasonably believes this to be the case.
3.          ASIC did not receive any submissions, and no changes were made to the draft legislative instrument following the consultation.

Operation of the instrument

Part 1 – Preliminary

1.          Section 1 of the Instrument specifies the title of the Instrument.
2.          Section 2 of the Instrument specifies that the Instrument commences on the day after it is registered on the Federal Register of Legislation.
3.          Section 3 of the Instrument specifies that it is made under paragraphs 926A(2)(a) and 992B(1)(a) of the Corporations Act.
4.          Section 4 of the Instrument provides that each instrument included in a Schedule to this Instrument is amended or repealed. Schedule 1 to the Instrument repeals ASIC Instrument 2016/186.
5.          Section 5 of the Instrument provides a simplified outline for the Instrument. Its purpose is to assist readers in understanding the substantive provisions. However, the outline is not intended to be comprehensive. Readers should rely on the substantive provisions when considering the Instrument’s effect.
6.          Section 6 of the Instrument specifies definitions to be relied upon in the Instrument.

Part 2 –Exemption

1.          Subsection 7(1) of the Instrument exempts foreign licensees from the obligations in Division 6 of Part 7.8 of the Act to:

1.    keep financial records in accordance with specified provisions (paragraph 988A(1)(b) of the Act);
2.    prepare and lodge with ASIC an annual profit and loss statement and balance sheet and appoint an auditor (subdivisions C and D of Division 6 of Part 7.8 of the Act);
3.    if the foreign licensee is a foreign ADI—keep financial records in sufficient detail to show the particular categories of information set out in section 988E of the Act.

1.          Subsection 7(2) of the Instrument sets out the conditions of the relief. A foreign licensee that relies on the exemption must lodge with ASIC at least once every calendar year:

1.    a certified copy of its balance sheet, cash flow statements and profit and loss statement in the form and containing the particulars which the licensee reasonably believes are required by the laws of the foreign licensee’s place of origin; and
2.    a certified copy of a document setting out the views of the licensee’s auditor about the documents, including a statement that the auditor reasonably believes those documents were audited in accordance with the requirements of the licensee’s place of origin.

1.          Section 8 of the Instrument exempts foreign ADIs from the requirement to hold an AFS licence for the provision of a financial service where:

1.    the financial service consists only of dealing in derivatives and/or FX contracts;
2.    the financial service does not involve the making of a market for derivatives or FX contracts;
3.    the dealing is entered into for the purpose of managing a financial risk that arises in the ordinary course of the foreign ADI’s banking business;
4.    the dealing is entered into on the foreign ADI’s own behalf;
5.    the counterparty for the dealing is a wholesale client; and
6.     the foreign ADI does not hold an AFS licence covering the provision of the financial service.

Legislative instrument and primary legislation 

1.          The subject matter and policy implemented by this instrument are more appropriate for a legislative instrument rather than primary legislation. The matters contained in the Instrument are appropriately used to deal with specific, technical and machinery issues. If the matters in the Instrument were to be inserted into the primary legislation, they would insert, into an already complex statutory framework, a set of provisions that are highly specific in nature and may become redundant over time.
2.          The Instrument is made under powers specifically delegated to ASIC to modify or affect the operation of the Act to provide a tailored and flexible regulatory environment that is fit for purpose.  
3.          It will be a matter for the Government and for Parliament as to whether the Act or Regulations may be amended in future to include the relief in the Instrument.

Duration of the instrument

1.          The Instrument self-repeals at the start of 1 April 2031. This allows sufficient time for the Government and for Parliament to determine whether to amend the primary legislation to incorporate the relief in the Instrument.

Legislative authority

1.          The Instrument is a disallowable instrument made under paragraphs 926A(2)(a) and 992B(1)(a) of the Act.
2.          Paragraph 926A(2)(a) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.6 (other than Divisions 4 and 8) of the Act.
3.          Paragraph 992B(1)(a) of the Act provides that ASIC may exempt a person or class of persons from all or specified provisions of Part 7.8 of the Act.

Statement of Compatibility with Human Rights 

1.          The Explanatory Statement for a disallowable legislative instrument must contain a Statement of Compatibility with Human Rights under subsection 9(1) of the Human Rights (Parliamentary Scrutiny) Act 2011. A Statement of Compatibility with Human Rights is in the Attachment.

Attachment

Statement of Compatibility with Human Rights

This Statement of Compatibility with Human Rights is prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.  

ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121

Overview

1. Foreign companies that hold an Australian financial services licence (foreign licensees) are subject to financial reporting and record keeping obligations under Division 6 of Part 7.8 of the Corporations Act 2001 (Act). Registered foreign companies are subject to separate financial reporting obligations under subsection 601CK(1) of the Act.

2. ASIC Corporations (Foreign Licensees and ADIs) Instrument 2026/121 (Instrument) exempts foreign licensees from financial reporting, record keeping and audit obligations under Division 6 of Part 7.8 of the Act, subject to meeting certain conditions, on the basis that these obligations are duplicative and disproportionately burdensome. Further, these obligations apply to the whole of a foreign company, not just their operations in Australia (which are often a relatively small part of their business).

3. The Instrument also exempts foreign licensees that are authorised deposit-taking institutions (foreign ADIs) from the requirement to hold an Australian financial services (AFS) licence for the provision of financial services which consist only of dealings in derivatives and/or foreign exchange contracts on their own behalf, in limited circumstances, where the counterparty for the dealing is a wholesale client.

4. This relief is consistent with a similar AFS licensing exemption under the Corporations Regulations 2001 and the principle that persons who transact solely on their own behalf are not generally required to hold an AFS licence under Australia’s financial services regulatory regime.

Assessment of human rights implications

5. This instrument does not engage any of the applicable rights or freedoms.
 

Conclusion

6. This instrument is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.