ASIC Report 382 Overview of decisions on relief applications (June to September 2013) reveals the regulator’s decision to deny an advice group’s request for relief around the grandfathering of conflicted remuneration payments under FOFA.
ASIC believed at the time that any steps to resolve the industry’s concerns related to the grandfathering provisions should be considered by “the new government”, according to the report.
“We were unwilling to pre-empt any decision of the new government on this issue by providing a no-action letter,” said ASIC.
The Coalition government announced changes to the grandfathering regulations that will allow the transfer of financial advice client books between advisers and licensees on 20 December 2013.
ASIC also refused to issue a no action letter in relation to the bans on conflicted remuneration and volume-based shelf-space fees.
“The applicant had received legal advice that entering into new profit sharing arrangements (or amending existing arrangements) with superannuation trustees in relation to the provision of group risk insurance may be in breach of these bans,” said ASIC.
“We considered that a no-action letter was unnecessary. Regulatory Guide 246 Conflicted remuneration confirms that profit sharing arrangements can be facilitated under the FOFA amendments to the Corporations Act where the full rebate or discount is passed on to members within a reasonable period of time,” said the report.
ASIC also refused to provide relief to a firm that was concerned it would not be able to demonstrate compliance with the modified version of the best interests duty.
However, the regulator did grant five no action letters to advice firms related to the production of fee disclosure statement (FDS), said ASIC.
“No action letters were requested because the five entities would not be in a position to comply with the FDS obligations until 1 January 2014, at which time a major IT infrastructure project designed to automate the FDS obligations would be operational,” said the report.
A no action letter was also issued to a licensee allowing it an extra 30 days to deliver FDSs to clients, it said.
Speaking to InvestorDaily, Minter Ellison partner Richard Batten said there is a reluctance among licensees to apply for relief from ASIC lest it result in increased scrutiny from ASIC.
“There may be a reluctance to seek confirmation from ASIC unless you’re pointing to very specific anomalies that you don’t feel raise significant policy issues,” he said.
So even if a licensee receives legal advice that some amount of regulatory relief might be in justified, it is never “set in stone”, said Mr Batten.
“There may be a reason to seek no action from ASIC, but it may affect your ability to rely on [your own legal advice] once ASIC’s said they disagree,” he said.
