ASIC has today issued Consultation Paper 329 Implementing the Royal Commission recommendations: Advice fee consents and independence disclosure (CP 329). CP 329 seeks feedback on:
- draft legislative instruments that deal with advice fee consents and independence disclosure; and
- a proposal to issue more guidance in Regulatory Guide 245 Fee Disclosure Statements (RG 245) to help industry meet obligations around ongoing fee arrangements, including renewal notices and fee disclosure statements.
ASIC’s draft legislative instruments are based on the Government’s exposure draft legislation for reforms arising from the Financial Services Royal Commission (Royal Commission) recommendations (see Background). They set out the requirements proposed for:
- written consent to deduct, or to arrange to deduct, fees from a client account as part of an ongoing fee arrangement (Recommendation 2.1). See ASIC Corporations (Consent to Deductions-Ongoing Fee Arrangements) Instrument 2020/XX;
- written consent to deduct fees from a superannuation account under an arrangement that is not an ongoing fee arrangement (Recommendation 3.3). See ASIC Superannuation (Consent to Pass on Costs of Providing Advice) Instrument 2020/XX; and
- written statement that discloses advice providers’ lack of independence (Recommendation 2.2). See ASIC Corporations (Disclosure of Lack of Independence) Instrument 2020/XX.
The final form of these instruments is subject to change depending on the form of the enabling legislation, and the feedback received in response to CP 329. The instruments will not commence until the legislation takes effect.
CP 329 also seeks feedback on additional issues relating to ongoing fee arrangements, including renewal notices and fee disclosure statements. ASIC is proposing to update RG 245 in mid-2020. To offer more clarity and certainty to industry, the updated guidance will address the key areas of non-compliance identified in Report 636 Compliance with the fee disclosure statement and renewal notice obligations.
ASIC is seeking public input to CP 329 by 7 April 2020 in order to ensure that the form of the proposed ASIC instruments is settled ahead of the proposed date of commencement of the law reform on advice fee deductions and independence disclosure.
ASIC Commissioner Danielle Press said, ‘The Government proposes to introduce legislation implementing the Royal Commission recommendations from 1 July 2020. We are consulting on our proposals now to help provide certainty to industry as it prepares for the new requirements.
‘ASIC welcomes views not only from industry but from all interested stakeholders. This will help us understand any concerns that consumers, firms and trustees may have about our proposals,’ said Ms Press.
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Background
The Royal Commission Final Report made a number of recommendations to address consumer harm resulting from fees for no service, superannuation balance erosion through inappropriate advice fees and poor advice from financial advisers whose duty to their client conflicts with their own interests.
The Government released exposure draft legislation for public consultation on 31 January 2020. See Ongoing fee arrangements and disclosure of lack of independence and Advice fees in superannuation.
The exposure draft legislation seeks to implement Recommendations 2.1, 2.2 and 3.3 of the Royal Commission. Under the exposure draft legislation, it is proposed that ASIC has powers to make certain legislative instruments in relation to advice fee consents and independence disclosure.
