ASIC has now released a second Information Sheet in relation to Ongoing Fee Arrangements ("OFAs").
The new ASIC Information Sheet 286 ("Info Sheet 286") applies to OFAs:
- entered into on or after 10 January 2025; or
- that are already in force on 10 January 2025, from the first anniversary of the arrangement that occurs after the start day.
The existing ASIC Information Sheet 256 ("Info Sheet 256") continues to apply to:
- OFAs entered into or last renewed before 10 January 2025; and
- OFAs in force on the start day, until the first anniversary of the arrangement that occurs on or after 10 January 2025.
As a reminder, an OFA exists where:
- the fee recipient (either the licensee or a representative of the licensee) gives personal advice to a retail client;
- the fee recipient and a retail client enter into an arrangement, and
- under the terms of the arrangement, the client must pay the fee recipient a fee (however described or structured) during a period of more than 12 months (see section 962A).
Info Sheet 286 outlines the new ongoing fee arrangement obligations ("OFA obligations") that commenced on 10 July 2024 under the DBFO Act. The key points are summarised below.
Consent Obligations
Requirements for written consent to enter or renew an OFA
Under the Corporations Act, fee recipients are required to comply with the OFA consent obligations when entering into an OFA with a retail client. This means, the fee recipient must obtain written consent from the client to enter into (or renew the OFA) and for the ongoing fees that the retail client will pay under the OFA.
For the consent to be compliant, the fee recipient must disclose the following things to the retail client:
- the name and contact details of the fee recipient;
- an explanation of why consent is sought;
- the maximum period until the consent will cease to have effect;
- information about the services the client will receive under the OFA;
- the amount of each fee required to be paid by the client under the OFA, or a reasonable estimate of each fee;
- the frequency of the ongoing fees;
- a statement that the OFA can be terminated buy the client at any time; and
- a statement that the OFA will terminate if the consent is not given.
The consent must be dated and signed by the client and the fee recipient must keep either the original, or a copy.
Requirements for written consent to deduct fees from accounts
Similar to the requirements summarised above, the fee recipient must have consent to deduct fees from a retail client's account.
For the consent to be compliant, in addition to disclosing the items referenced above, the consent must:
- be dated and signed by the account holder;
- specify the name of the account holder and account number;
- for each amount to be deducted, specify the amount to be deducted or a reasonable estimate of the amount and a explanation on how it was calculated.
A fee recipient must stop deducting, or arranging to deduct fees from a retail client's account if:
- the consent has been withdrawn or varied in a way that prevents the deduction being made;
- the consent has expired;
- OFA has terminated;
- A new consent has been given.
OFA Can terminate without the client's consent
The key date in relation the OFA is the reference day. The reference day is:
- The date the client and fee recipient agree to use as the reference day; or
- The anniversary of the most recent reference day specified in a consent; or
- The anniversary of the day on which the OFA was entered into
A consent will cease to have effect 150 days after the anniversary of the day the OFA is entered into, or if a reference day applies, that date. Fee recipients have a period from 60 days before the reference day, to 150 days after the reference day to seek consent to renew the OFA. If a new consent is not sought, the OFA will terminate.
An OFA can terminate when:
- the client has not satisfied the written consent requirements outlined above; or
- the client has given written consent that ceased to take effect and has not given new consent.
Fee recipients must keep the following records for at least five years:
- each consent given by a retail client and the date the consent was given;
- any notification from a client to renew, or not renew, or terminate a OFA;
- any notice to vary or withdraw a consent, including the date of the notice and the date the fee recipient confirmed it had the notice;
- information which is disclosed to retail clients under the OFA consent obligations;
- details of any arrangement between the fee recipient and a third-party account provider;
- communications from the fee recipient about giving a
third-party account provider a copy of:
- the consent;
- a notice to withdraw or vary the consent; and
- written notice of when the consent ceases;
- the date on which an OFA is terminated;
- the basis on which an OFA is terminated.
Background
The second Info Sheet 286 follows the amendments made in the Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024 ("DBFO Act").
Further Reading
Treasury Laws Amendment (Delivering Better Financial Outcomes and Other Measures) Act 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
