AFA welcomes ASIC no-action on Victoria’s advisers

The Association of Financial Advisers (AFA) has welcomed the Australian Securities and Investments Commission (ASIC’s) no-action position for fee disclosure statement (FDS) and opt-in obligations for advice businesses which have a substantial part of their business located in Victoria.

AFA stressed that with advisers and their staff working from home in some cases, or being unable to work due to system issues or childcare responsibilities, it would unsurprising that a number of advisers missed the FDS and opt-in deadlines for some of their clients.

“ASIC have done everything that they can within the limits of the law to find a solution for Victorian based financial advisers impacted by FDS/opt-In non-compliance due to the COVID-19 lockdown. Broader relief measures are in the hands of the Government and we have communicated with them to explain the difficulties confronting financial advisers and to suggest potential solutions,” AFA said in a statement.

ASIC announced that they would not take action against a Victorian financial adviser who missed an FDS deadline for a pre-FoFA client between 2 August 2020 and 26 October 2020, provided they issue the FDS by 7 December 2020. 

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For pre-FoFA clients, an adviser must issue an FDS every year within 60 days of the disclosure date (anniversary of the ongoing fee arrangement) and a failure to issue the FDS on time would be a breach of the law, it did not lead to a termination of the ongoing fee arrangement.

As far as the post FoFA clients were concerned, ASIC provided a no action position with respect to post FoFA clients where the FDS or opt-in obligations were not met in the period between 2 August, 2020 and 26 October, 2020. 

“This means that they will not take regulatory action, however, it does not change the fact that the ongoing fee arrangement will be terminated and that the adviser will need to take action to notify the client and to recommence the arrangement,” AFA said.

“It is important to note that ASIC makes it clear that this no action position does not prevent legal action being taken by clients or third parties, however we think that this is unlikely.”

According to AFA, an FDS/opt-in recovery plan would assume that any adviser facing this situation would need to carefully analyse the exposure that they have, and then prioritise the work that needs to be done to recover the situation. This might include:

• The ongoing fee arrangement for post FoFA clients to be terminated from the date of non-compliance, so to recommence fees, post FoFA clients were likely to be the priority;
• Depending upon their licensee’s rules, an ongoing fee arrangement could be recommenced by the issue of an engagement letter that sets out the services to be provided and the fees to be charged.  The client would need to agree to this, however this could be done by electronic means;
• Where the ongoing fee arrangement was terminated for post-FoFA clients, there was technically no need to provide the FDS and the opt-in notice is now irrelevant and advisers may still choose to issue the FDS.
• With pre FoFA clients, as there was no termination of the arrangement, and an extension was provided until 7 December, 2020, these cases might be better to address after the post-FoFA clients had been resolved.