The 2004 class order issued under the Australian Securities and Investments Commission's (ASIC's) managed discretionary account (MDA) policy needs to be reviewed to better clarify what activity is permitted within a regulated platform as opposed to a full MDA authorisation.
That's the assessment of Toby Potter, chairman of the Institute of Managed Account Providers (IMAP), who recently met with the regulator to discuss the progress of the MDA Consultation Paper, which he said he expects will be released some time before the year's end.
The current model of a financial adviser providing a discretionary management service through a platform is not well captured in the class order, he said.
Potter added that some of the reporting requirements under the no-action letter are redundant, due to the fact that custody arrangements and regular reporting requirements are usually met by the existence of a platform.
"The issues for us are making sure that the regulations reflect current practices in administration and platform technology," he said.
According to The Fold Legal managing director Claire Wivell-Platter, ASIC seems to be of the view that the no-action letter was limited to rebalancing portfolios, whereas she understands that financial advisers have been using the class order to provide a more widespread discretionary management service.
"I believe the reason for this is at the time the letter was issued, equities weren't readily available on platforms, but since then they have been," she said.
"It's conceivable that the terms of the no-action letter are wide enough, because it does not specifically say that the activities should be limited to rebalancing."
With such a lack of clarity around the MDA authorisation, Wivell-Platter suggests that the regulator introduce a limited authorisation to discretionary services provided on a platform, since an adviser would already meet the administrative and reporting requirements under the no-action letter.
