ASIC testing licensees on Fee Disclosure Statement failings

The Australian Securities and Investments Commission (ASIC) is to pursue a specific project aimed at what it fears might be systemic non-compliance by financial services licensees with respect to financial advice Fee Disclosure Statements and Renewal Notices.

ASIC said it would be testing compliance across a range of small and large licensees and would report on its findings next year.

The project represents a direct flow-on from ASIC’s fee for no service investigations and the activities of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

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The regulator has flagged pursuit of the new project after stating that it had received a number of breach reports from licensee which indicated they might have failed to comply with Fee Disclosure Statement and Renewal Notice requirements implemented as part of the Future of Financial Advice (FoFA) reform in 2013.

It said it was investigating the breach reports and would take enforcement action where breaches were found to be sustained.

ASIC’s announcement said that in addition to investigating these particular instances, the volume and range of breach reports indicated a significant risk of systemic non-compliance.

“Therefore, ASIC will undertake a project that will test compliance with FDS and renewal notice requirements across the industry.”

ASIC will examine to what extent advice licensees:

  • issue FDSs and Renewal Notices to customers;
  • issue FDSs and Renewal Notices within the time frames set out by the law;
  • include the required content in the FDSs;
  • ensure the content of FDSs is accurate, for example, in describing what customers are charged for and what services customers have received; and
  • have appropriate procedures in place to ensure fees for ongoing services are discontinued when the arrangements are terminated as a result of licensees failing to comply with the FDS or Renewal Notice requirements.

The regulator’s statement said ASIC’s ongoing work on fee for no service failings in the advice industry had highlighted the importance of Fee Disclosure Statements and Renewal Notices and that these were designed to assist in mitigating future fee for no service failings.

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ISA funds who have fee for no service issues are exempt from ASIC investigations?

Yes, that seems to be the case. Industry Funds charge a fee to each and every member, collect the cash and provide "advice" to those who need it = sounds alot like the old commission model to me but not ASIC. ASIC certainly is special.

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