The Australian Securities and Investments Commission’s (ASIC’s) regulatory guidance on providing digital financial product advice to retail clients may have declared that the law is technology-neutral but it goes on to illustrate that financial advice law is not.
Mills Oakley partner and financial services lawyer, Mark Bland, said the regulatory guidance had limitations, especially in areas where laws were created with one, usually older, platform in mind, where there were functional differences between platforms.
“This can lead to outcomes that are not only different but problematic,” Bland wrote in a LinkedIn post.
“A more authentic statement [than the law being technology neutral] would be: ‘[ASIC’s policy for implementing] the law [aims to be] technological neutral’.”
Bland noted specific points raised in RG255 where problems could arise, including the need for one responsible manager to be RG146-compliant even though it would be the company providing the advice.
“This will be a challenge if the new training, education, and ethical standards are implemented,” he said.
In terms of risk and compensation, and the possibility of small errors to create significant losses for clients using digital advice, Bland noted professional indemnity insurance may not be adequate.
Bland also said guidance on complying with best interests’ duty when providing scaled advice was the most “valuable” section of RG255 as it was formulated in the era of analogue (human) platforms.
“ASIC’s RG255 is an example of ASIC balancing its objectives of improved performance of the financial system and promoting the confident and informed consumer with consumer protection,” Bland said.
“It will be very valuable to digital advice providers and there is no doubt that many will currently fall short on all of the items above.”
