Citing “a number of breach reports from licensees” indicating failure to comply with the fee disclosure statement and renewal notice components of the 2013 FOFA reforms, ASIC is now readying itself to investigate the industry due to concerns about “a significant risk of systemic non-compliance.”
As per the reforms, an FDS must be provided to a client in an ongoing fee arrangement with a licensee every 12 months, and a renewal notice every two years. ASIC said these items “address the problems of passive or disengaged clients paying ongoing advice fees without receiving ongoing advice.”
Specifically, ASIC reiterated that the FDS enables “customers to gain a better understanding of the advice services they are being charged for and the services they are entitled to receive,” and the renewal notice “significantly [reduces] the likelihood of passive or disengaged customers being charged ongoing fees.”
Here’s what the regulator plans to do:
The compliance test
Given the volume of breach reports, ASIC said it will investigate them to determine whether enforcement action is appropriate. On top of this, given the “systemic risk” mentioned above, the regulator intends to “undertake a project that will test compliance with FDS and renewal notice requirements across the industry.”
This will involve examining licensees’ behaviour with respect to issuing FDSs and renewal notices within mandated timeframes, inclusion of required content in FDSs, ensuring said content is accurate, and having “appropriate procedures in place to ensure fees for ongoing services are discontinued when the arrangements are terminated as a result of licensees failing to comply with the FDS or Renewal Notice requirements.”
The remediation test
Beyond this, ASIC will also supervise remediation programs “which require licensees who reported failures to issue compliant FDSs to customers and/or refund and compensate customers for the ongoing service fees charged.”
Given all of the above, it’s probably a good time to ensure your licensee is on track with these requirements.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here.
