The regulator has released updated regulatory guidance for MDAs in Regulatory Guide 197, as well as making a new legislative instrument that will replace ASIC's class order on MDAs that was due to expire ('sunset') on 1 October 2016.
The new instrument and regulatory guide requires specific upfront disclosure about: terminating an MDA contract; the fees charged within the MDA; and outsourcing arrangements.
The new guidance also incorporates relief for MDAs operated on a regulated platform and MDAs provided to family members. There are also new requirements to ensure investors are adequately informed when the MDA provider has a discretion to invest in products where recourse is not limited.
Existing MDA providers who currently offer MDAs under ASIC's regulated platform no-action letter must comply with the new regulatory requirements by 1 October 2018.
Other existing MDA providers must comply with the revised requirements from 1 October 2017.
Implemented Portfolios and the Institute of Managed Account Professionals (IMAP) both welcomed ASIC’s revision of the MDA class order.
Adam Seccombe, Implemented Portfolios chief of product, marketing and distribution, said the decision to revoke the limited MDA no-action letter provisions will have "broad benefits" for the sector.
“The removal of no action letters will drive greater professionalism as discretionary managed account providers will need to comply with higher hurdles of technical proficiency to deliver managed portfolio services to retail investors in Australia,” he said.
IMAP chair Toby Potter said the new guide is “easy to read” and will encourage more advisers to take up MDAs.
“ASIC has recognised that managed accounts are operated in many ways and the new regulatory guide recognises this in allowing multiple modes of operating,” he said.
IMAP also welcomed the termination of limited MDAs.
“ASIC indicated that it will give some consideration to the experience gained in operating a limited MDA service for those who apply to be fully fledged MDA providers,” Mr Potter said.
“The approach to adviser’s best interests obligations, which ASIC developed in the FOFA legislation, comes out very clearly in this new document.”
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