Mr Toby Potter, chairman of IMAP today welcomed the release of an ASIC Consultation Paper on Managed Discretionary Accounts (MDA's). "ASIC has been working on the review of MDA's for some time and IMAP together with other organisations has been part of that review" said Mr Potter. "We believe that the Consultation Paper that ASIC has released will result in an excellent outcome for investors and MDA providers alike. "It's a great example of a regulator being ahead of the curve in anticipating evolving market and regulatory conditions and ensuring that regulation provides a timely and supportive framework for well managed market innovation" said Potter.
ASIC notes that the drivers of its review included the increasing number of financial services organisation using MDA's as part of their response to FoFA, a need to address the unsatisfactory situation created by no action letters issued in 2004 and technology change. They also refer to the use of MDA's including investments which might expose investors to unexpected risks from the use of derivatives.
"In the Consultation Paper, ASIC recognises that MDA's are a mainstream product and a key response to the changes which FoFA is forcing on the advisory industry.
Most of the changes will have good outcomes in terms of clarifying aspects of regulation which were previously unclear or contradictory. For example, IMAP welcomes the proposal to remove the No Action letter relating to discretionary management on platforms and the removal of reporting duplication where portfolios are managed through platforms.
"The various tidying up proposals and the alignment of MDA and FoFA requirements is particularly welcome" said Potter "as there have been too many financial services regulations released which had the effect of contradicting those already in effect."
The requirements for NTA that bring MDA Operators into line with Responsible Entities will impose a significant burden on some current operators.
"Many advisory businesses which had contemplated adopting MDA's will have a much clearer understanding of the requirements and will find a Managed Account much more attractive as they restructure in response to ASIC." said Potter
During the consultation period in April, IMAP will be running briefing sessions in Sydney and Melbourne to explain the impact of the proposed changes.
IMAP is the peak industry organisation for the Managed Accounts industry and represents both advisory organisations, investment managers and service providers in this growing segment.
Source: IMAP media release, March 8, 2013