ASIC today put forward a number of proposals to update the record-keeping obligations for those who provide financial advice.
The move comes as the financial advice industry beds down the Future of Financial Advice (FOFA) and Stronger Super reforms, which will result in big changes for most Australian financial services (AFS) licensees including a thorough review of how they go about compliance.
‘Keeping records is important. Not only is it required by law, it's also good business practice,’ ASIC Commissioner Greg Tanzer.
One of the key FOFA reforms is the new best interests duty. ‘Licensees and their representatives have an opportunity to drive real change in their business’s customer focus as they implement this new obligation, and their record keeping can help cement that change,’ Mr Tanzer said.
‘It is in the interests of everyone - the firm, advisers and clients - to maintain good record-keeping practices, and is an important element of risk management.’
Consultation Paper 214 Updated record-keeping obligations for AFS licensees (CP 214) outlines the types of records that must be kept, including:
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records to prove that the licensee and its representatives have complied with the best interests duty and related obligations
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records of ongoing fee arrangements entered into with a client
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copies of documents - such as, fee disclosure statements and renewal notices - that fee recipients must receive for an ongoing fee arrangement, and
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records to prove the licensee and its representatives have complied with the ban on conflicted remuneration.
On the Stronger Super reforms, ASIC is also considering whether to impose a specific requirement on superannuation trustees to keep certain records where the trustee provides personal advice to members which they charge collectively as ‘intra-fund’ advice.
‘Our proposed record-keeping guidance is not designed to impose an additional administrative burden on industry. Instead, it is intended to give industry greater certainty about what they have to do,’ Mr Tanzer said.
In line with ASIC’s approach to the FOFA and Stronger Super reforms more broadly, ASIC will take a facilitative approach to compliance with the requirements until 30 June 2014.
‘We expect industry participants to make a reasonable effort to comply with the new regime, and we will take a measured approach where inadvertent breaches arise, or system changes are underway,’ Mr Tanzer said.
‘However, where we find deliberate and systemic breaches we will take stronger regulatory action.’
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Background
ASIC’s FOFA and Stronger Super pages have further information on ASIC’s implementation of these reforms.
Keeping proper records of advice and transactions to clients is a key requirement to ensuring financial services are provided efficiently, honestly and fairly. ASIC has been actively monitoring this space and, where companies have failed, has taken action, including recent cases such as Professional Investment Services Pty Ltd (refer: 13-178MR) and Macquarie Equities Ltd (refer: 13-010MR).