How the new rules will affect advisers
The Australian Securities and Investments Commission (ASIC) has recently changed the rules governing Managed Discretionary Accounts (MDAs) in Class Order 2016/968 and updated its guidance in Regulatory Guide 179 Managed Discretionary Accounts (RG 179).
After a three-year wait, advisers who offer MDAs or are thinking of doing so, now have clear direction.
“The new requirements are balanced. They take into account the need to protect clients’ interests and at the same time recognise the variety of ways in which MDA services are offered,” says Claire Wivell Plater, managing director of The Fold Legal, a specialist law firm that advises clients on financial services regulation. She’s pleased ASIC has taken industry concerns into account in the design of the changes.
New licensing requirements for ‘limited’ MDA providers are the most significant change. Advisers who have been operating managing discretionary accounts within a regulated platform without holding a specific licence authorisation will need to apply for one.
“The good news is there's a two year transition period for this. During this time, although advisers will need to demonstrate they have the required relevant skills, experience and training, ASIC will recognise experience gained from operating an MDA within a platform. That's very important, because it provides continuity for advisers and their clients,” she adds.
Wivell Plater warns advisers the process for applying for an authorisation to offer clients MDAs is rigorous and involved. Aside from applying for the license, advisers will need to demonstrate they can comply with the MDA requirements.
To do this, they will need to carefully document their MDA policies and procedures and review their disclosure documents to ensure they comply with the new requirements. “ASIC’s new approach is to ask for copies of some of these materials so they can form their own view about the likelihood of compliance. So advisers need to be ready,” she says.