ASIC has registered a legislative instrument providing relief from certain regulatory requirements in relation to COVID-19-related advice. The relief applies from April 15 and ASIC will provide 30-days notice before it chooses to repeal the instrument.
This month’s second Technical Blog will examine two of the four compliance relief situations outlined in the legislative instrument:
- When a Statement of Advice (SoA) is not required on early super access advice, and
- When an SoA is not required for other COVID-19-related advice to existing clients.
Situation 1 – no SoA required for advice on early release from super
An adviser doesn’t need to provide an SoA where advice on the client using the COVID-19 compassionate grounds condition of release is provided. In such a case, the client must pro-actively seek the advice (i.e. they are not responding to contact from the adviser) and the fee cannot exceed $300.
Advisers relying on this exception do need to create a record of advice. This record needs to note whether the client met the COVID-19 compassionate grounds condition of release; whether the adviser recommended the condition of release be used in response to the client’s situation, how much the client was advised to withdraw and why; and the name of the product the release be made from, as well as the implication of making that withdrawal.
This record of advice must be provided to the client as soon as practicable and the client must also receive disclosure of any potential adviser conflicts of interest related to remuneration or firm ownership.
Situation 2 – No SoA required on COVID-19 advice for existing clients
An adviser doesn’t need to provide an SoA where an existing client expressly states they need the advice due to the adverse economic effects of the coronavirus, and the adviser agrees that is the case. The client must have received a prior SoA from the adviser or an associated advice entity and the new advice must relate to a class of products on which advice has already been provided in a previous SoA.
Advisers relying on this exception do need to create a record of advice. This record needs to note the changes in the client’s relevant circumstances, the particulars of the recommendations made and the reasons they were made and any replacement of product information (including fees and consequences) that would usually be required in an SoA. In the event replacement of product information cannot be discovered by the adviser, this must be disclosed to the client, as must the potential for fees or adverse consequences to occur.
This record of advice must be provided to the client as soon as practicable and the client must also receive disclosure of any potential adviser conflicts of interest related to remuneration or firm ownership.
Be careful
Advisers need to be careful to adhere to the rules outlined in the legislative instrument when relying on one of its exemptions. Only one element needs to be missed for the adviser to lose the compliance exemption. If you are unsure, read the whole thing.
That said, there are four different compliance concessions in the legislative instrument and all the concessions should be considered.
Want to know more?
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You can also read ASIC’s legislative instrument and accompanying explanatory memorandum for more information.
Disclaimer
The information contained in this publication is based on the understanding knowIT Group Pty Ltd ABN 27755976705 AFSL 333649 has of the relevant Australian legislation as at the date shown in this publication. The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. knowIT Group is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations that you may make based on the information contained in this publication.
