What Counts as a Financial Product in Australia?

If your small business touches money in any way - from selling gift cards to offering investor shares or a staff option plan - you might be dealing with “financial products” under Australian law.

That matters because financial products are heavily regulated. Getting it right protects your customers and your business. Getting it wrong can trigger ASIC investigations, penalties, and reputational damage.

In this guide, we break down what counts as a financial product in Australia, when you may need an Australian Financial Services Licence (AFSL) or other approvals, the marketing and disclosure rules that apply, and the contracts and policies that help you stay compliant.

We’ll keep the language simple and focus on practical scenarios small businesses face, so you can confidently decide your next steps.

What Counts As A Financial Product Under Australian Law?

“Financial product” is a defined legal term in the Corporations Act 2001 (Cth). In plain English, it’s anything where a person makes a financial investment, manages financial risk, or makes non-cash payments using a facility.

Common examples include:

• Shares, options and other securities (including many startup investment instruments)
• Interests in a managed investment scheme (MIS)
• Derivatives and foreign exchange contracts
• Insurance (most types)
• Non-cash payment (NCP) facilities (e.g. some stored value/prepaid cards, digital wallets, certain gift card systems)
• Custodial or depository services (holding assets for others)

Some things are generally not financial products (or are carved out), such as ordinary invoices, lay-by arrangements, or loyalty programs that meet specific criteria. But the boundaries can be tricky - for example, a “gift card” may or may not be a financial product depending on how it works in practice (e.g. whether it’s a facility that allows non-cash payments to multiple merchants, whether funds are pooled, and what redemption rules apply).

Crypto and digital assets are evolving. Depending on their features, a token could be a security, a derivative, an MIS interest, or not a financial product at all. If your product involves crypto or tokenised rights, get targeted legal advice before launch.

Do You Need An AFSL Or Other Licence?

If you (or your platform) issue, deal in, make a market for, or give advice on financial products, you generally need an AFSL or to be appointed as an authorised representative of an AFSL holder.

Key triggers to explore include whether you are:

• Issuing a financial product (e.g. offering shares, options, or an NCP facility)
• Dealing in a financial product (e.g. applying for, acquiring, varying or disposing of it for someone)
• Arranging for a person to deal in a financial product (e.g. operating a platform that facilitates investments)
• Providing financial product advice (general or personal) or distributing the product
• Providing custodial/depository services (holding assets on behalf of others)

On top of the AFSL regime, businesses that offer or assist with consumer credit (e.g. lending to individuals or strata of home loans or BNPL-like models) may trigger the National Consumer Credit Protection Act 2009 (Cth) and require an Australian Credit Licence (ACL) - a separate licensing regime.

There are exemptions and reliefs in both frameworks. For example, certain one-off fundraising offers to wholesale clients or limited-scope non-cash payment arrangements may be exempt from some requirements. However, exemptions are narrow and technical, so it’s important not to assume you’re covered.

Common Scenarios For Small Businesses

Here are typical ways small businesses can stumble into the financial products space without realising it.

Selling Shares Or Raising Capital

Issuing ordinary shares, convertible notes or options will usually involve financial products. Fundraising to the public typically requires a disclosure document, unless an exemption applies. Many startups rely on the small-scale and wholesale client exemptions in section 708 of the Corporations Act.

If you’re considering private fundraising, review how section 708 works and who qualifies as a professional investor or a sophisticated investor.

Modern instruments like a SAFE note are also common in early-stage rounds. While they’re designed to be founder-friendly, they still engage the Corporations Act and need careful drafting and distribution.

Employee Equity (Options And ESOPs)

Offering equity to employees or contractors (e.g. options) is also a financial product activity. Australia offers useful regulatory settings for employee share schemes (ESS), but you’ll still need compliant plan rules and offer documents. A tailored Employee Share Option Plan can help you incentivise your team while managing tax, vesting and exit scenarios.

Gift Cards, Wallets And Non‑Cash Payment Facilities

If your business sells stored value (prepaid) cards, marketplace credit, or operates a digital wallet enabling non-cash payments, you might be issuing an NCP facility - which is a financial product. Some arrangements are exempt or subject to modified obligations, but the analysis is fact-specific. Consider how funds are held, redemption rights, breakage, and whether the facility is “single network” or multi-merchant.

Warranties, Guarantees And Insurance-Like Features

Extended warranties or loss/damage cover can drift into insurance territory, which is tightly regulated. Generally, only authorised insurers can issue insurance. Separately, many B2B contracts rely on bank guarantees and performance bonds to manage risk - if you’re accepting them, it helps to understand how bank guarantees operate and how to draft your contract to call on them correctly.

Investment Platforms, Marketplaces And Custody

Platforms that let users invest, trade or hold assets for others often engage multiple financial services, including dealing, advice and custody. Even where you’re “just” arranging for others, you may be carrying on a financial services business and require authorisation under an AFSL.

Do Marketing And Disclosure Rules Apply To You?

Once you’re in financial product territory, several conduct rules and consumer protections kick in. These are some of the big ones for small businesses:

General Versus Personal Advice

If you’re communicating recommendations or opinions that influence decisions about financial products, you may be providing financial product advice. Personal advice considers someone’s objectives, financial situation or needs; general advice does not. Both are regulated, and both must include appropriate warnings and be provided by authorised persons.

Design And Distribution Obligations (DDO)

For many retail financial products, issuers must create a Target Market Determination (TMD) and take reasonable steps to ensure products reach the intended customers. If you’re distributing someone else’s product, distributor obligations may apply to you as well.

Disclosure (PDS, Offer Documents And Cooling‑Off)

Retail offers often require a Product Disclosure Statement (PDS) or other offer documents. Fundraising for shares and notes has separate disclosure rules (with exemptions for private and wholesale offers). Even if you’re exempt, you must still ensure your communications are clear, not misleading, and consistent with Corporations Act and ASIC expectations.

Hawking And Advertising Restrictions

Cold-calling and unsolicited offers of financial products are heavily restricted (the “hawking” prohibitions). Marketing must be accurate, balanced and not misleading - a high bar in the financial services space. Keep strong internal sign-off processes for ads, emails and sales scripts.

Complaints, Hardship And Dispute Resolution

AFSL holders must have internal dispute resolution (IDR) processes that meet ASIC standards and belong to an external dispute resolution scheme (AFCA). If you provide consumer credit, additional hardship and dispute rules apply.

Licensing Pathways And Exemptions

There is no one-size-fits-all path to compliance. Broadly, small businesses consider these options:

• Obtain your own AFSL: Suits businesses that will issue their own products or want full control. It’s a significant compliance commitment (responsible managers, compliance program, training, monitoring, audits).
• Become an authorised representative: Operate under an existing AFSL for defined services and products, with supervision and reporting. Faster to market, but limited scope and ongoing oversight.
• Structure within exemptions/relief: Some activities (e.g. certain small-scale offers, limited network NCP facilities) may qualify for exemptions. You still need a robust legal analysis and controls to ensure you stay within the boundary.

If you’re raising private capital, get clear on the wholesale client categories, including professional investors and sophisticated investors, and how they interact with section 708 safe harbours.

Compliance Foundations: Systems, Contracts And Policies

If you operate in or near financial products, strong documentation and processes are essential. Here’s what most small businesses prioritise.

Governance And Product Controls

• Clear scope and authorisations: Define exactly which services you’ll provide (and won’t provide), and under whose licence.
• Product governance: Document product features, target market, distribution channels, controls and review cycles (DDO).
• Compliance plan and training: Maintain policies for advice, conflicts, incident management, complaints and record-keeping.

Customer‑Facing Documents

• Website Terms: Set rules for platform use and limit liability. If you run an app or platform, strong Terms of Use help define acceptable use, disclaimers and IP.
• Privacy Policy: If you collect personal information (you almost certainly do), publish and follow a compliant Privacy Policy and collection notices tailored to your data flows.
• Offer/Disclosure Documents: Prepare the right PDS or offer materials, or confirm your exemptions and ensure all communications are consistent and not misleading.

Capital Raising Documents

• Term Sheet: Summarises key investment terms, vesting and investor rights to streamline negotiation.
• Subscription/Note Agreements: Binding agreements for equity or convertible instruments. Teams often use a SAFE note at pre-seed, then a Share Subscription Agreement at seed/Series A.
• Shareholders Agreement: Governs decision-making, share transfers, exits and founder protections once investors come on board.

Employee Equity And Incentives

• ESOP/ESS Documentation: A compliant Employee Share Option Plan with offer letters, plan rules and tax info that align with the Corporations Act ESS settings.
• Employment Contracts: Tie incentives to performance and post-employment restraints, and ensure option treatment is clear on resignation or termination.

Third‑Party And Platform Arrangements

• Distribution/Representative Agreements: If you’re an authorised representative or you distribute on behalf of an issuer, make sure obligations, monitoring and reporting are clear.
• Custody/SaaS Vendors: Diligence on any third party that touches client money or data, with robust service levels, security and incident terms.

How To Approach Risk (Without Slowing Growth)

Financial product regulation can feel daunting. A practical, staged approach keeps you compliant and moving.

1. Map your product and flows: Sketch how money and data move, who issues what, and what promises you make to users.
2. Identify regulatory touchpoints: Mark potential AFSL/ACL triggers, DDO, disclosure, hawking, custody and privacy obligations.
3. Choose your pathway: Decide whether to obtain your own licence, operate under an AFSL, or restructure into an exemption (with clear guardrails).
4. Build documents and controls: Lock in terms, disclosures, policies and training. Keep marketing aligned with legal approvals.
5. Pilot and review: Start small, monitor complaints and incidents, and iterate your TMD, disclosures and controls periodically.

If you plan to raise capital along the way, align the legal work with your round - for example, tidying up your cap table and using a consistent SAFE note or equity documentation.

Frequently Asked Questions

Is a gift card a financial product?

Sometimes. A simple single‑store gift card may be exempt, but stored value facilities that let customers make non‑cash payments (especially across multiple merchants) can be financial products. The details matter - get the arrangement assessed before launch.

Do I need an AFSL to raise money from investors?

Issuing shares or notes is a financial product activity, but you don’t always need an AFSL to raise private capital. Focus on disclosure rules and whether you can rely on wholesale client and section 708 exemptions. Many early‑stage raises proceed under those pathways. The right approach depends on your specific round, investors and documents.

Can I advertise financial products on social media?

Yes, but advertising is tightly regulated. Ensure statements are balanced, not misleading, and appropriate for your target market. If any content could be financial product advice, it must be authorised and include required warnings. Hawking prohibitions also restrict unsolicited offers.

We’re just providing “general information” - is that still advice?

Potentially. General advice is still financial product advice if it influences decisions about financial products, even if it doesn’t consider personal circumstances. Many businesses use strong disclaimers and training, but authorisation is often still required.

Key Legal Documents You’ll Likely Need

Every business is different, but if you operate in or near financial products, you’ll typically consider:

• Terms of Use: Platform rules, acceptable use, disclaimers and liability limits for users (especially important for marketplaces or investment platforms).
• Privacy Policy: A tailored Privacy Policy and collection notices that reflect your actual data handling.
• Offer/Disclosure Documents: PDS or offer materials (or a clear basis for any exemption), kept consistent with marketing.
• Authorised Representative/Distribution Agreements: Where you operate under someone else’s licence or distribute another issuer’s product.
• Capital Raising Documents: Term sheet, subscription agreements, or a SAFE note for early rounds.
• Shareholders Agreement: Governance, decision‑making and exit rules once investors join.
• ESOP/ESS Documents: An Employee Share Option Plan with clear plan rules and offer terms.

You won’t necessarily need all of these on day one. Start with the documents that support your immediate business model and risk profile, then build out the rest as you grow.

Key Takeaways

• “Financial products” cover more than shares - they include non‑cash payment facilities, managed investment schemes, derivatives and more.
• If you issue, deal, advise on, or distribute financial products, you may need an AFSL or to be an authorised representative.
• Fundraising to private investors often relies on wholesale client categories and section 708 exemptions; get your offer documents and process right.
• Marketing financial products is regulated - ensure your ads aren’t misleading, meet DDO expectations, and avoid hawking breaches.
• Strong contracts and policies (Terms of Use, Privacy Policy, offer documents, shareholder and ESOP paperwork) reduce risk and set clear expectations.
• Map your flows, choose a licensing or exemption pathway, and build practical compliance controls that scale with your business.

If you’d like a consultation on whether your business is dealing with financial products and how to set up compliant documents, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.