MLC714 Legal Requirements Imposed by Regulators of The Financial Advice Industry Assignment Sample

Financial Advice Regulation

1. Victor Provided Tim And Nancy With Their Fees Disclosure Statement (FDS) On 1 August 2019

A Fee Disclosure Statement (FDS) is a yearly statement from an adviser giving personal advice to trade clients. It provides facts about the previous 12 months of an ongoing fee arrangement. Fee recipients must give clients an FDS on an annual basis, which discloses information about the previous 12 months of their ongoing fee arrangement.

FDS is a statement is writing that information about last 12 month. Victor provided Tim and Nancy with their Fees disclosure statement on 1 August 2019 which is right decision. When he submit previous year information than its will helpful for them to know about accurate information of service. The information include in FDS in below:

• the amount (in Australian dollars) of each ongoing fee paid by the client under the OFA in the previous year
• Victor can discuss them objective and risk of fund which is include of information
• To information about the services that the client was entitled to receive under the OFA in the previous year

The normal rule is that advisers must provide existing clients with an FDS within a 30 day period beginning on the disclosure day. For every year thereafter an FDS must be provided to the client on or before the end of a 30 day period beginning on the next disclosure day. Victor can include Ongoing Services you were entitled to receive and Ongoing Services you received information in FDS form.

The important information is FDS is not an invoice. No payment required for FDS. This FDS comprises the fees that you have paid in relation to your client services agreement.

Under the law (s962G and s962S) clients must be provided with an FDS within 60 days of the ‘disclosure day’. Discloser date means ongoing service arrangements commenced OR the date of the last FDS provided to the client.

Failure to comply the FDS results is the termination of the ongoing fee arrangement. However, civil penalty may be sought if ongoing fees are charged after the arrangement has terminated. These duties are not appropriate if the ongoing fee procedure relates to instalment payments of the original information fee or if it does not relate to “a period of more than 12 months.

2. Victor Stated In The FDS That All Fees Were Paid In Australian Dollars And They Were 1.8% Of Tim And Nancy’s Portfolio?

Victor specified in the FDS that all fees were paid in Australian dollars because the margin to be charge smaller than Australian bank. So the exchange rate is more favorable which is very cheaper to buy currency from abroad.

The exchange rate values is one currency to another currency. Exchange rate is matter every countries economy Australian exchange rate is not different like this. Its influence international trade and business. Changes in exchange rate is effect Australian economy in two ways. Like as:

• Direct effect: there are same price of good and service in Australia and abroad product.
• Indirect effect: on economic activity and inflation as changes in the relative price good and services.

The best way to take Aus dollar like Visa card, master card and Amex card. The availability, facility can influence victor stated in the FDS that all fees were paid in Australian dollars. They were 1.8% of Tim and Nancy portfolio which is actually indicating good sign. Actually when you transection in currency than you must follow the currency market values. Otherwise you are falling suffering as well as.

3. Victor Did Not Disclose Any Commissions He Received From A Third Party In His Fds

The Replacement Explanatory Memorandum notes at para 1.13 that an ongoing fee paid by a third party to an AFS licensee or its representatives will generally not constitute an ongoing fee for the purposes of s962A(1)(c) and 962A(2)(c), unless the fee is paid with the clear consent of, or at the direction of, the client.

This law clearly identify that Victor statement is not illegal. The commission generally need to be disclosed in the FDS, on the basis that they are paid under a commercial arrangement between a product issuer or platform operator and a fee recipient. Therefore, fee receipt is consider whether any commission arrangement were entered into with the clear consent of.

Another ways we know that it’s very difficult for a fee receipt to determine the commission and advice fees, Victor consider that disclose all of the fees in the FDS. If commission are not released in the FDS, the fee receipt should be careful to safeguard that the wording of the FDS does not misinform clients by implying or suggesting that the fees disclosed are the only payments received by the fee recipient.

4. Victor Was Not Able To Provide Tim And Nancy A Comprehensive Review Meeting Every Six Months

Tim and Nancy want to do comprehensive meeting every six month but victor is unable to attend because is spending most of the time Welstars Sydney office. If he attend this meeting than it’s really helpful for Tim and Nancy. The comprehensive review is helpful for them to know about SMSF benefit, strength, opportunity, threat and weakness etc. It will be a great opportunity from them. 

Benefit of Comprehensive meeting

• Identify possible new approach
• Identify risk and threat
• Address specific critical issue
• To know about new opportunity
• Had great opportunity to discuss with new opportunity

Victor is spending more time in Welstar’s Sydney office because here was shortage of Advisor. So, he was working there but he need to do comprehensive meeting with Tim and Nancy. The comprehensive review meeting is very organized like as:

Comprehensive review of product

• Mission
• Vision
• Objective
• Product strength
• Opportunity
• Threat
• Risk
• Market position
• Benefit etc

It also making time to time chart for the helpfulness.

Question 2:

1. Financial advisers will be required to disclose the total fees that will be charged over the next 12-month period. So, ASIC proposed that s962H(1)(a)(i) should be repealed and rather than having ‘backwards-looking’ FDS that sets out the services the client received, or could have received in the previous 12 months, the FDS should include information on the fees to be charged and services to be provided in the coming year, as well as information about the previous year.

The FDS comprise information about last 12 month period about:

• Amount of fees paid by client
• The service received by client
• Service the client was entitled to receive

The recommendation 2.1 provide protection against the future fees for no service conduct. The law should be conduct

• Annually renewed by the client
• Must be record in writing each year service which is very helpful to know about the each year performance
• Neither document nor require payment of fees from any account detained for or on behalf of the client except on the client’s fast written authority to the entity that conducts the account given at, or immediately after, the latest renewal of the ongoing fee arrangement.

The royal commission also recommended that FOFA client’s renewals obligation notice should be removed. But the present time laws has been changed like as: The SIS Act sets out general fees rules that apply to all superannuation trustees. The general fees has been restricted for the type of financial product.

The another royal commission 3.3 motivations for wanting advice fees deducted from superannuation, Deduction of any advice fee (other than for intra-fund advice) from superannuation accounts other than MySuper accounts should be prohibited unless the requirements about annual renewal, prior written identification of service and provision of the client’s express written authority set out in Recommendation 2.1 in connection with ongoing fee arrangements are met.

A backward looking document is plainly for the fee disclosure statement. The service of client was entitled to receive. Neither the description of ongoing fee arrangement in section 962A(2) nor any other provision of the Corporations Act seems to require an adviser to identify prospectively with any degree of specificity what services the client will be entitled to receive, and what services will be providing.

The reason FDS is knowing all information about service and others cost which is very helpful for client. The FDS can maintain chart where we gather all information about service here. Factually, financial advisers would have outspokenly opposed increased disclosure duties. It is perhaps an indication of the mounting professionalism of the advice industry that many Licensees have selected to accept more rigorous consumer protection mechanisms that, in addition to better engaging clients, will no longer necessitate them to provide Fee Disclosure Statements.

The context of amendment existing law declare under that arrangement a fee is to be salaried during a period of more than 12 months.

2. Financial advisers will be required to seek renewal of ongoing fee arrangements by clients annually. So, ASIC proposed to repeal s 962L(1) which require financial advisers to renew Ongoing Fee Arrangements (OFA) every two years and exempt any OFA entered into prior to 1 July 2013 from renewal requirements.

The law should be amended to provide that OFA. Which is

• Must be renewed annually
• Must record in writing each year service that the client usually entitled to receive and the total of the fees are emergency

For recommendation 2.1 the purposes of the draft legislation s962(2)(c), a signed renewal notice contract from a client (as obligated at s962K) should be a valid authorization form that can be accepted by product providers.

I can show some renewal notice which is very important for this task:

• Section 962K provides that a fee recipient necessity give a renewal notice in relation to the ongoing fee arrangement to the client before the end of a period of 60 days beginning on the renewal poster day for the arrangement.
• The ongoing fee agreement the client must elect in written to renew it within 30 days. If the client is unable to renew the ongoing fee agreement, than the agreement will terminate. If the client does not inform the fee recipient whether or not they wish to renew the ongoing fee arrangement then the arrangement terminates 30 days after the end of the renewal period.
• ASIC also has the power to exempt a person, or class of persons, from compliance with the requirement to provide a renewal notice if they are topic to a code of conduct approved by ASIC.
• Section 962E provides that a client may, at any time, terminate the ongoing fee preparation and cannot be compulsory to pay any amount that is more than the amount referred to in the ongoing fee arrangement and any other costs incurred by the fee recipient as a result of the termination.
• Section 962F afford Section 962F provides that the ongoing fee arrangement will terminate if the fee recipient does not comply with the renewal notice obligation in section 962K that the ongoing fee arrangement will terminate if the fee recipient does not comply with the renewal notice obligation in section 962K
• Ongoing fee arrangements which were entered into prior to the
• Future of Financial Advice (FOFA) reforms which took effect from 1 July
• not currently required to comply with renewal requirements, but
• Are required to comply with the fee disclosure statement requirements. Ongoing fee arrangements which were entered into prior to the Future of Financial Advice (FOFA) reforms which took effect from 1 July 2013 are not currently required to comply with renewal requirements, but are required to comply with the fee disclosure statement requirements.

Finally, in this report we are finding lots of relation data and also maintain purchasing report. We also find individual service and knowing about the present situate. They maintain government rules to do business. The risk and benefit can show up as well as. The royal commission and also discuss about recommendation.

Reference for Financial Advice Regulation

Research Team, assured S. (2019, September 9). Five questions (and answers) about FDS'. Retrieved May 14, 2020, from https://www.assuredsupport.com.au/articles/2019/9/8/five-questions-and-answers-about-fds

Frydenberg,J.(2020).Retrieved 14 May 2020, from https://treasury.gov.au/sites/default/files/2020-01/c2020-48919m-explanatory-memorandum-rec2_1.pdf

(2020). Retrieved 14 May 2020, from https://download.asic.gov.au/media/5360405/rep636-published-28-november-2019.pdf

ASIC reports on compliance with financial advice fee disclosure obligations - AdviserVoice. (2020). Retrieved 14 May 2020, from https://www.adviservoice.com.au/2019/12/asic-reports-on-compliance-with-financial-advice-fee-disclosure-obligations/

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