No action position for licence conditions

The introduction of the professional standards reforms for individuals who provide personal advice to retail clients in relation to relevant financial products means that there are inconsistencies between the standard training licence conditions imposed on each Australian financial services (AFS) licensee which has an authorisation to provide financial product advice to retail clients and the professional standards reforms.

This no-action position is an interim measure to address these inconsistencies and we will consider issuing a legislative instrument to formalise these requirements in 2021.

Background

AFS licensees are generally required under their licence conditions to ensure that individuals who provide financial product advice on their behalf have either:

• completed appropriate training courses that have been approved by ASIC in writing, or
• been individually assessed as competent by an assessor that has been approved by ASIC in writing - see conditions 7(a) and 7(b) in Pro Forma 209 Australian financial services licence conditions (PF 209).

There are limited exceptions and alternatives to these requirements.

Prior to 24 September 2012, AFS licensees used the ASIC Training Register to satisfy themselves that assessment services and training courses had been approved by ASIC in writing. The ASIC Training Register listed individual assessment services and training courses which ASIC approved as meeting the training courses in Regulatory Guide 146 Licensing: Training of financial product advisers (RG 146).

On 24 September 2012, we put the ASIC Training Register under review, with the intention to implement a mechanism to replace it. The register content is valid up until this date.

After 24 September 2012, AFS licensees relied upon a no-action position issued by ASIC to satisfy their obligations in conditions 7(a) and 7(b) of PF 209: see Media Release 13-149MR ASIC consults on enhancements to training standards (24 June 2013).

The ASIC review of the Training Register was overtaken by the Government’s decision to consider options to improve the professional standards of financial advisers, the Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry and subsequently by the professional standards reforms.

Existing Providers

An ‘existing provider’ is a person who is a relevant provider any time between 1 January 2016 and 1 January 2019, and is not banned, disqualified or subject to an enforceable undertaking on 1 January 2019.

A ‘relevant provider’ is an individual who is:

1. an AFS licensee, an authorised representative, employee or director of an AFS licensee, or an employee or director of a related body corporate of an AFS licensee, and
2. authorised to provide personal advice to retail clients, as the AFS licensee or on behalf of the AFS licensee, in relation to relevant financial products.

‘Relevant financial products’ means financial products other than:

1. basic banking products
2. general insurance products
3. consumer credit insurance
4. a combination of any of those products.

With the commencement of professional standards reforms on 1 January 2019, the no-action position set out in Media Release 13-149MR ASIC consults on enhancements to training standards (24 June 2013) will remain relevant:

1. for existing providers until 1 January 2022; and
2. for individuals who provide general advice, or personal advice on basic banking products, general insurance or consumer credit insurance, and individuals who provide financial product advice in relation to a time-sharing scheme, until ASIC considers its policy in relation to these advisers.

That is, from 1 January 2019 until 1 January 2022, we will not take any action against an AFS licensee for breach of the licence conditions 7(a) and 7(b) set out in PF 209, provided that the licensee is satisfied that each existing provider who provides financial product advice on behalf of the licensee has satisfied one of the following:

1. have completed training courses before 25 September 2012, which were listed on the ASIC Training Register, at an appropriate level that are relevant to their functions and tasks; or
2. have been individually assessed as competent before 25 September 2012 by an authorised assessor listed on the ASIC Training Register; or
3. have completed training courses, at an appropriate level relevant to their functions and tasks, which an authorised assessor (as defined in RG 146) has approved as meeting the relevant training standards in RG 146; or
4. have been individually assessed as competent by an authorised assessor (as defined in RG 146).

This no-action position will only apply to existing providers until 1 January 2022, the date by which they are required to pass the exam.

The no-action position in relation to individuals who provide:

1. general advice;
2. personal advice on basic banking products, general insurance or consumer credit insurance;
3. financial product advice only in relation to a time-sharing scheme,

will continue to apply until we conduct our review of RG 146.

Provisional relevant providers

Provisional relevant providers are relevant providers who are undertaking work and training in accordance with s921B(4) of the Corporations Act.

From 1 January 2019 the no action position set out in Media Release 13-149MR ASIC consults on enhancements to training standards (24 June 2013) will no longer be relevant to provisional relevant providers.

Instead, the following new no-action position will apply to licensees who authorise provisional relevant providers:

We will not take any action against an AFS licensee for breach of conditions 7(a) or 7(b) of PF 209 in relation to provisional relevant providers, provided that the licensee is satisfied that a provisional relevant provider meets the education and training requirements in s921B(2), s921B(3) and s921F of the Corporations Act.

This no action position is given in accordance with our policy in Regulatory Guide 108 No action letters (RG 108). That is, it is not a legal opinion; it is an expression of regulatory intent and is specific to the facts and circumstances. For further information, see RG 108 and, in particular, RG 108.33.

Future work

In early 2021, we intend to consult on a legislative instrument to formalise the no-action positions in relation to AFS licence conditions and financial product advice training.