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13-037MR ASIC releases guidance on code approval under FOFA
ASIC will now consider applications for approval of Future of Financial Advice (FOFA) codes following the release of guidance today.
The guidance, in the form of an update to Regulatory Guide 183 Approval of financial services sector codes of conduct (RG 183), details how ASIC will approve codes and use its relief powers, and follows consultation last year, including a consultation paper released in October 2012 (refer: 12-257MR).
‘Approved FOFA codes must meet substantially the same policy objective as opt-in: that is, they must promote client engagement and ensure clients do not pay ongoing financial advice fees where they are receiving little or no service,’ ASIC Commissioner Peter Kell said.
ASIC’s guidance should assist code applicants to decide whether to submit a new or existing code for approval. It will also help licensees and representatives to decide whether to comply with opt-in or to subscribe to an approved code.
confirms ASIC will, for the purposes of FOFA codes only, accept an application for approval of a code with limited content
confirms ASIC will not accept an application for approval of a single entity FOFA code
includes a checklist of code content that ‘obviates the need’ for complying with the opt-in requirement, and
introduces a requirement that an administrator of a FOFA code must maintain a public register of members.
‘A FOFA code approved under our policy will provide a flexible alternative to complying with the opt-in requirement,’ Mr Kell said. ‘In particular, under a FOFA code ongoing client arrangements may not terminate in the same way that they do under the law.
‘All codes approved under RG 183 – including FOFA codes – will still need to meet ASIC’s existing standards relating to compliance and administration and review.’
ASIC’s code content checklist requires a FOFA code applicant to address the scope and renewal of ongoing fee arrangements, what ongoing services are to be delivered to clients and appropriate record keeping.
‘As we begin to assess code applications, we will work through a number of practical implementation issues with code applicants, licensees and their representatives,’ Mr Kell said.
‘We encourage code applicants to engage with us early on in the process and, as needed, we will give further guidance on our FOFA webpage.
‘Effective cooperation between all parties will be necessary for an approved code to work as an effective alternative to complying with the law.’
ASIC will publish guidance on the FOFA conflicted remuneration provisions on Monday 4 March 2013.
Under s962K of the Corporations Act 2001, a financial adviser who enters into an ongoing fee arrangement with a retail client after 1 July 2013 must give that client a renewal notice every 2 years. If the client does not agree to continue the fee arrangement, or does not respond to the renewal notice, then the arrangement terminates. This is known as the ‘opt-in requirement’.
As an alternative, ASIC may grant relief from compliance with the opt-in requirement if it is satisfied the adviser is bound by an approved code which ‘obviates the need’ for opt-in.
The adviser has at least until 1 July 2015 to either comply with the opt-in requirement or have joined an ASIC-approved code.
Further information on ASICs implementation of the FOFA reforms is available on ASIC’s FOFA webpage.