ASIC’s proposed changes to managed accounts fails to recognise their substantially lower risk, warns the Institute of Managed Account Providers.
IMAP chair Toby Potter says the regulator’s mooted changes fail ‘to recognise the substantially lower risk inherent in managed discretionary accounts (MDA) because assets are not pooled and, in many cases, these are operated through regulated platforms, affording investors a substantial degree of protection, independent of the MDA operator’.
An MDA service has four key components, Potter says. ‘These are personal advice, investment management, administration (including reporting), and asset holding arrangements.’
The AFSL authorisation structure and regulatory framework for MDA Operators recognised these four components and the diverse way in which they were provided to clients. Potter says IMAP ‘is concerned that the current regime and the proposed changes may not adequately recognise this market reality, leading to over-regulation of many MDA service models’.
‘The proposed regulatory changes substantially close the gap between the managed investment schemes and MDAs. In paragraph 19 of the Consultation Paper, ASIC says that its goals include consistency with other financial products and services,’ Potter says.
‘But, the approach taken in several areas fails to recognise the substantially lower risk inherent in managed discretionary accounts (MDAs) because assets are not pooled and, in many cases, these are operated through regulated platforms, affording investors a substantial degree of protection, independent of the MDA operator’.
A main feature of the proposed changes to the regulations is a substantial NTA requirement, Potter says. ‘The requirement and the proposed calculation methodology will substantially advantage large vertically integrated organisations at the expense of many of the current independent MDA operators. This will reduce investor choice and favour those organisations where conflicts of interest are endemic, and increase costs to investors without necessarily improving investor protection.’
Toby Potter
director
0414 443 236
toby.potter@imap.asn.au
Christopher Hocking
0418 603 694
chris@chstrategies.com.au
chstrategies.com.au
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