Guidance on key royal commission legislation released

ASIC’s Consultation Paper 329: Implementing the Royal Commission recommendations: Advice fee consents and independence disclosure, released on Tuesday, outlines the corporate regulator’s proposed approach to implementing the recommendations.

ASIC said it would develop three legislative instruments outlining the written consent fee recipients must receive from clients before arranging to deduct ongoing fees from a client’s account; the written consent super trustees must receive from members before allowing ongoing fees to be deducted from their account; and prescribing requirements in the statement providing entities must include in their financial services guide around lack of independence.

In terms of the new fee permissions from clients, the corporate regulator said it would be consulting on whether written consent forms would need to include information about the services to be received by the fund member or client under the ongoing fee arrangement, given this could be unnecessary duplication as the consent would often be sought at the same time as an ongoing fee arrangement was being entered into.

The list of proposed requirements to be included in the consent forms included the name and contact details of the account holder, an explanation of why the account holder’s consent was being sought, the services the client was entitled to receive under the arrangement, the frequency, amount and time of each payment deducted from the client’s account, details of benefits in the account that could be eroded because of the fees, the expiry date of the consent and the option for the client to withdraw their consent at any time.

In regard to new disclosure of non-independence requirements, ASIC proposed advisers would need to disclose on page one of their financial services guide, or supplementary financial services guide, if they did not comply with the definition of independence in the Corporations Act.

However, the regulator said it was open to consultation around how else to achieve the ‘prominent’ display of disclosure required by the recommendations of the royal commission report.

ASIC also said it encouraged advice firms to “collect and analyse consumer data” in relation to the effectiveness of disclosures of conflicts of interest, and that the regulator intended to monitor the implementation of the proposed requirements.

“We may reconsider the requirements in the proposed legislative instruments if we find they are resulting in adverse consumer outcomes,” ASIC said.