The financial planning industry has been eagerly awaiting an
update on the future of the current MDA regime.
Financial planners with powers of attorney to rebalance
portfolios (but not to contribute or withdraw funds) within a
platform that is regulated by ASIC (eg. investor directed portfolio
services (IDPS), IDPS-like, superannuation wraps
and master trusts) are currently exempted from:
the need to hold an Australian Financial Services Licence to
provide the MDA service;
the need to register the MDA service as a managed investment
certain product disclosure requirements.
However, this is provided they comply with certain financial
services guides and statement of advice requirements as set out in
ASIC Class Order CO 04/194 Managed Discretionary Accounts
(CO 04/194) and Regulatory Guide 179 Managed
Discretionary Account Services (RG 179).
Despite such limited powers of attorney within a platform
replicating the operation of an MDA, this relief was given in the
form of an ASIC no-action letter, dated 5 November 2004.
ASIC revisited this approach to MDAs in Consultation Paper
CP 200 Managed discretionary accounts: Update to RG 179
(CP 200) which was released on 8 March 2013, with
submissions having closed on 19 April 2013.
What's about to happen
As proposed in CP 200, ASIC has taken the view that the limited
powers of attorney relief should no longer continue when CO 04/194
sunsets on 1 October 2016. ASIC have recently confirmed that they
therefore intend to:
withdraw the no-action relief letter;
incorporate some relief into a remade class order. However, the
relief will only extend to avoiding duplicated disclosure
requirements as between the MDA operator and the platform operator;
there will be a transition period of between 12 to 24 months
for limited powers of attorney holders to obtain their MDA
authorisations, however the exact transition period will not be
decided until ASIC's regulatory policy group meets in early
An updated RG 179 and Class Order are expected to be issued in
late September 2016.
Next steps for financial planning groups
Financial planning groups should consider whether they have
limited powers of attorney which permit rebalancing within a
platform, and decide:
whether they want to continue offering this service; and
if "no": how to communicate this to
clients, revoke the powers of attorney, and amend their terms of
service with their client and possibly the platform operator.
Amendments will also need to be made to disclosure documents;
if "yes": consider whether they have
the requisite skill sets amongst staff to obtain an MDA
authorisation, and if not, look at procuring these. The group
should also start to plan the MDA licensing application and
implementation project, and consider any amendments to terms and
conditions and disclosure documents which are required as a
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