The Australian Securities and Investments Commission (ASIC) has released a new guide relating to ongoing fee arrangements (OFA) in response to concerns raised during the financial services royal commission, and noted it would be unable to vary when and how the new obligations would apply.
The corporate regulator stated the release of Information Sheet 256 (INFO 256) would replace Regulatory Guide 245 Fee disclosure statements, and answers frequently asked questions (FAQ) about the obligations that apply to fee recipients in relation to ongoing fee arrangements, fee disclosure statements (FDS) and ongoing fee consents.
ASIC stated INFO 256 took into account responses from the financial advice sector to recent consultations carried out by the regulator, which received requests for shorter, simpler and more user-friendly regulatory guidance.
In the introductory text for the information sheet, ASIC stated: “We have prepared these FAQs to help fee recipients with their OFA obligations. ASIC does not have powers to provide exemptions from the OFA obligations in the law or to modify how the obligations apply.”
The regulator also pointed out the obligation to give clients an FDS annually where there was an ongoing fee arrangement had applied since 1 July 2012.
It noted the government made an announcement late last week regarding a new regulation to assist advisers with meeting their existing obligation to provide an FDS during the transition year, and that INFO 256 would be updated once that regulation was made.
In making that announcement on 11 June, Superannuation, Financial Services and the Digital Economy Minister Jane Hume said that while financial advisers will still be required to report any fees paid under an OFA and provide an estimate of any fees that will be paid in the subsequent 12 months, they can issue this FDS anytime between 1 July 2021 and 30 June 2022, and the date of issue will become the anniversary date for future FDSs.
“The government is aware that industry may have difficulties generating an accurate fee disclosure statement during the transition period of 1 July 2021 to 30 June 2022 as fees are required to be reported up to the day before the statement is issued,” Hume said.
“To address circumstances where advisers are unable to report actual fees in the required time, the government will make a regulation to allow financial advisers to report an estimate of fees for the 60 days prior to the statement being issued. The estimate would be reported alongside the actual fees charged for the remainder of the previous 12 months.”
She added the regulation, which will be made before 1 July 2021, would only apply for the transition period after which advisers would have 60 days from the anniversary date to issue their FDS, which must report all fees paid in the previous 12 months.
The Association of Financial Advisers welcomed the announcement by Hume after flagging the creation of FDSs for the previous 12 months in a transition year as an impossible task for advisers to complete, and said the proposed regulation would add some complexity this year but was achievable for the advice sector.
