Planning practices warned on sunsetting of LMDAs
Financial planning group Paragem has warned member practices that the days of so-called Limited Managed Discretionary Accounts (LMDAs) may be coming to an end as the necessary Australian Securities and Investments Commission (ASIC) class order sunsets.
Paragem has written to member practices pointing out that it has been, for some time, recommending that they move away from LMDA arrangements, because of the looming regulatory sunset.
"For some time Paragem has been recommending that practices start moving away from the LMDA arrangement as (a) it is under review by ASIC and will likely be phased out in the not too distant future, and (b) there are alternative arrangements now available, such as managed portfolios and Separately Managed Accounts (SMAs), that provide discretionary portfolio management without the need for an annual Statement of Advice (SoA)," the Paragem communication said.
Paragem has noted a letter from an ASIC in-house lawyer confirming the sunsetting of the Class Order on 1 October, stating, "Please rest assured that we will remake the class order and issue new regulatory guidance before it sunsets, taking into account submissions we received on CP 200 [ASIC Consultation Paper 200, released 8 March 2013] and feedback from our industry roundtable meetings. Where appropriate, we will include suitable transition periods for any new obligations we impose".
However it has warned against reading too much into the ASIC letter, suggesting that it changes are possible that might require MDA Operators to meet the enhanced capital requirements proposed in CP 200 — something that "will inevitably mean that some Operators may need to recapitalise, restructure, change their business model or exit the industry".
"Furthermore CP 200 included a proposal to revoke the platform no-action letter and instead require licensees who currently rely on this no-action position to comply with the licensing requirements for MDA Operators and the Class Order conditions, ie. the LMDA would cease to exist," the Paragem communication said.
Recommended for you
Results are out for the latest sitting of the ASIC financial advice exam, with the pass rate falling for the second consecutive sitting.
Adviser losses for the end of June have come in 143 per cent higher than the same period last year, and bring the total June loss to over 350.
ASIC’s enforcement action is having an active start to the new financial year, banning a former Queensland financial adviser for 10 years in relation to fees for no service conduct.
ASIC has confirmed the industry funding levy for the 2024–25 financial year, and how much licensees can expect to pay.
