ASIC sends message on advice and MDAs

Managed Discretionary Account (MDA) operators have been sent a clear message by the Australian Securities and Investments Commission (ASIC) about the need for advice with respect to retail clients.

The ASIC message has been conveyed in its latest Overview of Relief Decisions where it revealed it had rejected an application from an MDA operator for relief from the requirement to provide retail clients with personal advice about the suitability of the MDA product.

It said the MDA operator applicant had proposed to offer retail clients on its trading platform an MDA service that automatically enacted or mirrored trades and strategies of different strategy providers—including professional traders—that the client elected to follow.

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ASIC said it had rejected the application because “granting relief would result in regulatory detriment, because without the provision of personal advice:

  1. there would be a lack of accountability and responsibility to retail clients for the automated trades from the applicant, as the MDA operator, and the strategy providers selected by the MDA operator; and
  2. regulatory certainty and the objective of promoting consumer confidence in using financial services would be undermined.”

ASIC said there was an alternative lawful way for the applicant to comply with the conditions in ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968; and the applicant had not demonstrated that compliance with ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968 would result in unforeseen circumstances or unintended consequences of the licensing provisions, which would justify a departure from the policy in RG 179.

 




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