ASIC cuts Vic advisers a break on FDSs and renewals

The Australian Securities and Investments Commission (ASIC) has moved to give financial advisers impacted by the Victorian COVID-19 lockdown some relief by allowing them a “no action” position with respect to possible shortcomings around fee disclosure statements (FDSs) and renewal documents.

Money Management understands that the “no action” position reflects persistent lobbying on the part of the Association of Financial Advisers (AFA) and other adviser representative organisations.

ASIC made it clear that it was not empowered to go further in granting Victorian advisers relief and that it was actively encouraging them to support and engage clients by using technology, “for example, by sending and receiving documents electronically”.

“However, ASIC acknowledges that some financial advice businesses in Victoria may find it difficult to comply with the fee disclosure statement (FDS) and renewal notice obligations in respect of clients who cannot readily access technology to receive and respond to documents,” it said. “ASIC does not have the power to provide an exemption from the FDS and renewal notice obligations or modify how the obligations apply. However, to assist these businesses, ASIC has provided a no-action position in relation to these obligations.”

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“ASIC does not intend to take regulatory action against an Australian financial services (AFS) licensee or their representative for a breach of sections 962G, 962K and 962S of the Corporations Act in the following circumstances.

“In relation to section 962S of the Corporations Act (pre-FOFA clients), where:

• The FDS is due between 2 August, 2020, and 26 October, 2020; and
• The FDS has not been given to the client on, or prior to, 26 October, 2020, and it is given to the client by 7 December, 2020.

"In relation to sections 962G and 962K of the Corporations Act (post-FOFA clients), where:

• An FDS or renewal notice is due between 2 August, 2020, and 26 October, 2020; and
• The FDS or renewal notice was not given to the client or was not given within the timeframes required by sections 962G and 962K.”

ASIC said the no-action position only applied to AFS licensees or representatives where their business is solely, or a substantial part of the business is, located in Victoria.

“Where businesses are otherwise impacted by the Victorian restrictions, ASIC will take this into account,” it said.

ASIC pointed out that, given that it did not have exemption and modification powers in relation to the FDS and renewal notice obligations this meant that, relying on the no-action position did not prevent an ongoing fee arrangement (OFA) terminating in relation to post-FOFA clients, where the FDS or renewal notice is not given to a client, or has not been given within the prescribed timeframes.

“Where an OFA terminates, the AFS licensee or representative must stop charging fees to the client (s962P of the Corporations Act) and inform the client in writing that the arrangement has terminated. The licensee or representative must then enter into a new OFA with the client,” it said.

Further, the no-action position is not intended to affect the rights of third parties to take action in relation to any contravention.

“This no-action position is given in accordance with our policy in Regulatory Guide 108 No-action letters (RG 108). That is, it is not a legal opinion; it is an expression of regulatory intent and is specific to the facts and circumstances. For further information, see RG 108," it said.

“ASIC will continue to monitor the appropriateness of the no-action position, having regard to the ongoing impact of COVID-19 and the Victorian Government’s announcements in relation to restrictions in Victoria. This no-action position may be withdrawn at any time.”