ASIC begins consultation on new advice licensee regulations

ASIC has proposed updates to Regulatory Guide 105 Licensing: Organisational competence (RG 105) to support the professional standards reforms, which aim to lift the education, training and ethical standards in the financial advice industry.

The proposals in Consultation Paper 305 'Organisational competence requirements for advice licensees: Update to RG 105' (CP 305) are based on the existing draft guidance published by the Financial Adviser Standards and Ethics Authority (FASEA).

"Our proposals are designed to strengthen the organisational competence of financial advice licensees by ensuring that advisers are supervised by at least one responsible manager who satisfies the new education and training standards," ASIC commissioner Danielle Press said.

"We would like to add to the existing options for responsible managers to demonstrate their knowledge and skills by introducing a new Option 6. This option will reflect the higher levels of competence expected in the industry."

ASIC is proposing that advice licensees would be required to have at least one responsible manager who satisfies Option 6; responsible managers who wish to satisfy Option 6 would have to pass the financial adviser exam, satisfy the degree requirement that applies to existing financial advisers, and meet the CPD requirements; and both new and existing responsible managers who wish to satisfy Option 6 would have until 1 January 2021 to pass the exam and until 1 January 2024 to satisfy the degree requirement.

Submissions for CP 305 are due by 6 December 2018, with an updated RG 105 setting out the new organisational competence requirements for advice licensees expected to be released in early 2019.

RG 105 sets out the framework that ASIC uses to assess an Australian Financial Services licensee's compliance with the organisational competence obligation in s912A of the Corporations Act 2001.

As part of this framework, AFSL applicants currently have five options for demonstrating the knowledge and skills of their responsible managers.

For responsible managers of advice licensees, the knowledge component of the relevant options is informed by the training standards for advisers in Regulatory Guide 146 Training of financial advice providers (RG 146).

The standards in RG 146, which also apply to financial advisers who provide personal advice to retail clients on more complex financial products, will be superseded by the new standards in the Corporations Amendment (Professional Standards for Financial Advisers) Act 2017. The new education and training standards will include an exam, a degree requirement, a professional year and continuing professional development (CPD) requirements.