Leak reveals ASIC's MDA plans

In the letter, an ASIC lawyer explains that the MDA changes proposed in Consultation Paper 200 Managed discretionary accounts: Update to RG 179 will be put on hold pending the outcome of the government’s Financial System Inquiry (FSI) and further amendments to the FOFA reforms.

ASIC was set to release updated guidance and class orders for MDA operators in April 2014.

“We now think it is appropriate to assess the implications of the FSI and FOFA amendments on MDA operators, and the financial system more broadly, before we amend the existing regulatory arrangements for MDA operators,” the letter stated.

The amendments to the FOFA legislation are unlikely to be finalised until the formation of the new Senate on 1 July 2014, and the FSI is not expected to release its final report until November 2014.

“In reaching this decision, we are also mindful of the government’s deregulatory agenda and the current moratorium on any significant financial services regulation,” said the letter.

However, ASIC remains committed "in principle" to considering the proposed changes to its policy on MDAs, according to the letter.

“ASIC’s review of this industry identified areas where we think our guidance and relief should be modified, including in response to concerns raised by industry,” it said.

The ‘sunsetting’ provisions of the Legislative Instruments Act 2003 provide “additional impetus” for a review of ASIC’s regulatory policy on MDAs, it said.

“In 2016, in the absence of any intervention by ASIC, the relief in ASIC Class Order [CO 04/194] Managed discretionary accounts will cease to have effect under the Legislative Instruments Act 2003,” said the letter.

“This would have a substantial impact on industry because MDAs would then be regulated on the same terms as other registered managed investment schemes,” it said.

In remaking this class order, it is incumbent on ASIC to review the operation of the class order and address aspects that are not working well or could be improved, the letter stated.

“Before updating our regulatory guidance, we will give due consideration to setting appropriate transition periods in order to provide industry with sufficient time to adjust to the changes,” it said.

“We will provide a further update to industry on the status of our review of MDAs in due course,” the letter concluded.