ASIC issues warning after unveiling new FDS guidelines

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ASIC has issued a warning to financial planners they face strong regulatory action if they fail to comply with new fee disclosure statement (FDS) requirements under the FoFA reforms.

Under the guidelines, which were released last week, planners who have an on-going fee arrangement with a client must provide an annual FDS to that client, including information on:

  • fees paid by the client
  • services provided to the client
  • services the client was entitled to receive

The new guide also sets out three limited no-action positions, for cases where regulatory action will not be taken by ASIC. The no-action positions, which only apply in relation to existing clients, are:

  • when a planner is unable to get all the information required for the FDS from an assignor of the on-going fee arrangement
  • when a planner provides the FDS earlier than the set disclosure date
  • when a planner provides the FDS later than the disclosure date because they are unable to determine when the fee arrangement was entered into

ASIC commissioner Peter Kell said the regulatory guide indicated what ASIC’s approach would be in administering the provisions over the next 12 months.

“ASIC will take a facilitative approach for the first 12 months of the FOFA reforms, until 1 July, 2014. We expect industry participants to make a reasonable effort to comply with the new regime, and we will take a measured approach where inadvertent breaches arise, or system changes are underway," he said.

"However, where we find deliberate and systemic breaches we will take stronger regulatory action.”

The Financial Planning Association (FPA) CEO Mark Rantall welcomed ASIC’s regulatory guide as a “largely common sense” approach to the new disclosure obligations faced by planners from 1 July, but outlined a specific concern he had about the FDS.

“The FPA remains concerned by the introduction of a fee disclosure statement for existing fee paying clients. This obligation is cumbersome and creates costly duplication, and we would argue for further discussion and a quick resolution to the downside consequences of this approach in its current form,” he said.

"On the positive, the FPA is pleased with ASIC’s approach to introduce so-called "no-action" clauses in the regulatory guide as a pragmatic approach to resolving non-compliance, where financial planners are unable to meet their obligations through no fault of their own."

Industry Super Network (ISN) Chief Executive David Whiteley said transparency around financial planner remuneration under the new reforms was important in helping the industry to transition to a fully-fledged and highly-respected profession.

“These measures in the FoFA reforms are filling a regulatory gap to ensure that much-needed disclosure is provided to all clients, both existing and new,” said Whiteley.

“It is reasonable that clients understand the services they are paying for where an ongoing fee is being charged.”

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