Industry seeks clarification of 1 October changes

Following ASIC’s revision of the Managed Discretionary Account (MDA) regulatory framework - ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968 and a revised RG 179 (released in September 2016), further clarification of these changes have emerged.

Speaking at the inaugural MDA Providers Forum in Sydney recently, MDA specialist and managing director of The Fold Legal, Claire Wivell Plater, highlighted some of the areas affected by the new changes that come into effect from 1 October 2017, saying they potentially have a significant impact on how MDA businesses operate.

Wivell Plater highlighted 10 areas that MDA providers need to be aware of. These include


  1. MDA provider’s FSG
ASIC now requires an MDA provider’s FSG to contain additional information, which includes:
- Any external MDA adviser’s name and contact details;
- The MDA’s service fees and costs, in the same form as a PDS;
- Information about all outsourcing arrangements;
- The FSG must detail the risks of non-limited recourse products;
- MDA advisers’ FSGs do not need information about MDAs.

  1. MDA contract
The following additional information must be contained within an MDA contract:
- The MDA’s service fees and costs, in the same form as a PDS;
- The difference between acquiring financial products directly and through the MDA service;
- How the contract can be terminated, how long it will take to terminate the contract, and how MDA assets will be disposed or transferred.

  1. Investment program
MDA providers must now ensure that the investment strategy provides sufficient detail to enable the client to make an informed decision on its suitability.

  1. SOA
The MDA provider must now review the SOA.
“ASIC does not require this to be a comprehensive review of the SOA or an endorsement of the advice. ASIC has informed us that the obligation is limited to ensuring that on its face, nothing in the SOA indicates that the MDA services offered by the provider would be inappropriate for the client,” said Wivell Plater.
“As this new requirement has created quite some consternation amongst MDA providers, it would be helpful if ASIC provides more definitive guidance on its expectations of this review.”

  1. Unregistered MIS
There is now a blanket prohibition on unregistered Managed Investment Schemes (MIS) in an MDA.

  1. Breaches
“Under this requirement, all breaches of an MDA must be reported within 10 days, not five days as previously required,” said Wivell Plater.

  1. Non-limited recourse arrangements
For non-limited recourse arrangements, express client consent is required, which must be separate to the MDA contract.

  1. Termination
In the event of an MDA termination, ASIC requires that MDA providers have a written policy that clearly explains the process of termination. In addition, clients can request a copy of this termination policy.

  1. Reporting
MDAs operating under platforms are not required to provide quarterly reports or annual audit reports, as these are provided by the platform.

  1. Review reports
ASIC requires MDA providers to review transaction reports and notify clients of any omissions.
“While these 10 areas will require MDA providers to implement stronger disclosure and review processes, there are other areas under RG 179 that are becoming clearer for the industry” Wivell Plater said. “This includes conflicts of interest, which is still a major concern for ASIC, but helpful guidance is contained with RG 179.

“The other area is Fee Disclosure Statements. External MDA advisers are not required to include MDA provider fees in their FDS, and integrated MDA services will not need to include MDA provider fees if the advice and MDA provider fees are not bundled.”

However, while ASIC had provided greater clarification around the updated Class Order, Wivell Plater believed there were still a number of areas in RG 179 that remained unclear and inconsistent.

“For example, why is the investment strategy required to be in the MDA contract, when it is already in the investment program that is given to the client at the same time? There are still a number of areas that it would be helpful for ASIC to re-examine,” she said.

According to the Institute of Managed Account Professionals (IMAP) chairman, Toby Potter, IMAP would be seeking greater clarification around these areas of inconsistency prior to the 1 October implementation date.
The MDA Providers Forum is a special interest group of IMAP that focuses on the unique interests of MDA providers.

Next Events

IMAP's Direct Indexing Conference 2024

IMAP Direct Indexing Conference 2024

IMAP Direct Indexing Conference focuses on topics including
 
  • What is Direct Indexing?
  • Direct Indexing: The international experience
  • Customised Ethical or ESG
  • Direct Indexing: Technology and Legal Constraints
  • Direct Indexing: Australian Landscape
Registration is free - please use the "Registration" buttons for either Melbourne or Sydney below

Melbourne Monday 18th March 2024 (2pm to 5pm) 

Sydney Thursday 21st March 2024   (2pm to 5pm)

Please note that registrations are limited, and if you are unable to register please contact Jenny Phimleut IMAP Program Director on

P: +61 2 8003 4147 or email jenny.phimleut@imap.asn.au

Please also note that this conference is being held on the same day and location (but different rooms) following the 2pm conclusion of the above IMAP Portfolio Management Conference.
IMAP's Portfolio Management Conference 2024 Optimising Clients' Portfolios in 2024

Optimising Clients' Portfolios in 2024

IMAP's Portfolio Management Conference looks at optimising clients' Portfolios and finding the right path to achieve investment goals in 2024 
 
For more information on the conference program, speakers and registering for the Conference please use the Register button for your city of choice below:

Melbourne - Monday 18th March 2024 
or Sydney - Thursday 21st March 2024
 
Please note that Early Bird discounts are available 29 February 2024
IMAP Specialist Webinar Series - AI and its Impact on Advice, Portfolio Management and Investment Management

IMAP Specialist Webinar Series - Making a Success of Introducing a Managed Account Program : Lessons from Experience

Join us  at midday on each of the 3 days to hear from experts on AI and its Impact on Advice, Portfolio Management and Investment Management
 

Registrations now open please use Registration Button below you only need to register once for the series of 3 webinars the same link will work for all 3 webinars

Webinar Series CPD Accredited for 3 hours approx

Monday 19th February 12PM AEDT 
Topic:  AI in Advice

 

Glenn Calder - Viridian Financial Group

James Wartho - FinTalkr

 

 

Tuesday 20th February 12PM AED 
Topic:  How is AI being used to enhance Portfolio Management?

 

Michael Strachan - Corinella Capital

Socrates Vossos - WealthPilot

Webinar Series CPD Accredited for 3 hours approx

 

Wednesday 21st February 12PM AEDT 
Topic:  Using AI in Investment

 

Cameron Gleeson - Betashares

Monik Kotecha - Insync

Contact us

Email
This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Phone
0414 443 236