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AMP - Content Enhancement - Financial Advisory

Permanently deleted user
Edited

James Shearing [AMP Services Limited]

My business is licensed to provide Managed Discretionary Account (MDA) services. Obligations covering this area are not covered in any great detail, so the Modules do have limitations and there are probably other areas where there are gaps. If I can explain the risk-based approach used and the limitation of the modules, the business will then hopefully be acceptable these risks in favour of the benefits the obligations registers provide.

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  • Permanently deleted user
    Edited

    LexisNexis Content Team

    The factors we consider are:

    • Does compliance/non-compliance of this obligation affect the ability of an entity to conduct business or regulated activity? These are often found in obligations that relate to licensing and authorisation.
    • What are the customer/client related obligations? These obligations tend to be if quite high priority to an organisation given the possible consequences of non-compliance. We try to make sure that these are easily identifiable. For example, these obligations include:
      • Customer Protection in Relation to Financial Services
      • Dealing with Clients’ Money and Other Property
      • Best Interests Obligations and Remuneration
      • Financial Product Disclosure and Other Requirements Relating to Issue, Sale and Purchase of Financial Products
      • Responsible Lending (in ACL)
      • Dispute Resolution, both internal and external
    • Are there any specific prohibited conduct? These are usually contained in Market Misconduct and Other Prohibited Conduct
    • What are the ongoing operational requirements? These would include obligations such as ongoing compliance with licence conditions, having a risk management framework, ensuring organisational competence, any ongoing disclosure requirements to the regulators etc. In modules for APRA regulated entities, this will include all the Prudential Standards that are applicable to that entity.

     

     

    The points above are the non-negotiables for all our industry modules and will be included in all modules. Where it is a requirement as stated in a legislative source, in our guidance we tend to use ‘must’. Where it is a recommended action that may help in achieving compliance but is not a legislative requirement, in our guidance we use ‘should’.

     

    The other obligations included in each of the other industry modules will depend  very greatly on the industry. For example, the inclusion of Common Reporting Standards in AFSL, obligations around policy management in life insurance, obligations related to tax agents and compliance with standards issued by FASEA in Financial Advisory etc. They are important but are industry specific.

     

    We can definitely look into including the FPA Code of Professional Practice in the Financial Advisory module. We will also look into including MDAs. We will aim to include these by early June 2019, if not earlier. May I please ask for a bit of time to consult with our legal experts and provide you with a firmer idea of how this inclusion will look like (ie what are the additional obligations) by the end of the second week of April?

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  • Permanently deleted user
    Edited

    James Shearing [AMP Services Limited]

    Since your email I’ve completed quite an extensive review of the obligations with a focus on the Financial Advisory (Ex Issuer) Module and noticed a couple of areas which I like you to consider adding. The obligations would apply to most other licensees providing advice.

     

    Gaps include:

    • Witnessing of Binding Death Nominations per Reg 6.17A. This is an area of concern to ASIC and came up in the Royal Commission around advisers not witnessing nominations correctly.
    • Charging of fees in a way consistent with the Sole Purpose Test (s62 of the SIS Act) ie you can’t charge a fee against a client’s super portfolio for advice unrelated to super.  
    • Product replacement obligations is a fundamental disclosure requirement for advisers. Whilst these requirements are referenced in one of the obligations, there is no mention of the relevant section (947D of Corp Act). I think it would be helpful if this is added for completeness.
    • The Best Interests Duty is another key provision for advisers. While I accept it is covered, I’d like to see the obligation divided into more sub-obligations given the number of underlying requirements the Duty covers (7 steps) and its importance. This would make it easier to map and organise controls against each sub-section instead of having around 20+ controls against a single obligation because of its scope.
    • Ongoing fees is another area which has received a lot of attention in the Royal Commission and media and covers quite a few underlying requirements, yet it is grouped together under a single obligation. I think it would be helpful if it was divided into more sub-obligations to allow for easier control mapping.
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  • Permanently deleted user

    James Shearing [AMP Services Limited]

    The Life Insurance Remuneration Act and related Life Insurance Commissions Instrument 2017/510 expanded the definition of conflicted remuneration and impacts upfront and ongoing commission rates and claw-back provisions. These went live on 1 January 2018.

     

    I note that the Life Insurance Modules prepared by Lexis apply to life insurance businesses (ie product issuer), not licensees providing advisory and arranging financial services.

     

    I think these requirements could be added to the existing 6.06 obligation which does not appear to include it. Further references can be found in ASIC’s RG 246.

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