ASIC today announced it is reviewing its guidance and regulation of managed discretionary accounts (MDAs).
Consultation Paper 200 Managed discretionary accounts: Updates to RG 179 (CP 200) outlines proposed changes to our guidance and relief for MDAs.
‘The MDA sector has changed significantly since our guidance was released in 2004,’ ASIC Commissioner Peter Kell said.
‘This review will ensure that our requirements for MDA operators are up to date, address emerging risks and are consistent with our approach to other financial products and services.’
ASIC commenced a review of the MDA sector in 2012 as a result of the recent growth in the number of offerings and increased interest from financial planners as a result of the FOFA reforms.
The consultation paper proposes that ASIC:
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revoke two temporary no-action positions which cover certain MDA arrangements and incorporate our final position on those issues into our main guidance and relief
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implement one of three alternative proposals which seek to ensure MDA investors are adequately informed when their MDA operator has discretion to invest in products where recourse is not limited (e.g. contracts for difference)
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insist on more detailed and specific upfront disclosure from MDA operators on key issues, and
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update our guidance to provide greater certainty, and to reflect the changes in the law that have been implemented as part of the FOFA reforms.
We also propose to update the financial requirements for MDA operators to ensure they are consistent with the obligations imposed by ASIC on other financial products.
'Higher financial requirements are designed to ensure that MDA operators have adequate resources to fulfil their obligations,' said Mr Kell.
Comments on CP 200 are due by 19 April 2013.
Background
MDAs are arrangements that involve a person (an MDA operator) managing a portfolio of assets for a retail client on an individual basis. There are a wide variety of arrangements that can constitute an MDA. Common types of MDAs include separately managed accounts (SMAs) and individually managed accounts (IMAS).
ASIC’s current regulatory approach is set out in Regulatory Guide 179 Managed discretionary accounts (RG 179) and accompanying class order relief in [CO 04/194].
ASICs review of our guidance and relief for MDAs follows on CP 176 Review of ASIC policy on platforms: Update to RG 148 (CP 176).
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