ASIC releases guidance on code approval under FOFA

ASIC will now consider applications for approval of Future of Financial Advice (FOFA) codes following the release of guidance.

The guidance, in the form of an update to Regulatory Guide 183 Approval of financial services sector codes of conduct  details how ASIC will approve codes and use its relief powers, and follows consultation last year, including a onsultation paper released in October 2012.

‘Approved FOFA codes must meet substantially the same policy objective as opt-in: that is, they must promote client engagement and ensure clients do not pay ongoing financial advice fees where they are receiving little or no service,’ ASIC Commissioner Peter Kell said.

ASIC’s guidance should assist code applicants to decide whether to submit a new or existing code for approval. It will also help licensees and representatives to decide whether to comply with opt-in or to subscribe to an approved code.

The guidance:

• confirms ASIC will, for the purposes of FOFA codes only, accept an application for approval of a code with limited content
• confirms ASIC will not accept an application for approval of a single entity FOFA code
• includes a checklist of code content that ‘obviates the need’ for complying with the opt-in requirement, and
  introduces a requirement that an administrator of a FOFA code must maintain a public register of members.

‘A FOFA code approved under our policy will provide a flexible alternative to complying with the opt-in requirement,’ Mr Kell said. ‘In particular, under a FOFA code ongoing client arrangements may not terminate in the same way that they do under the law.

‘All codes approved under RG 183 – including FOFA codes – will still need to meet ASIC’s existing standards relating to compliance and administration and review.’

ASIC’s code content checklist requires a FOFA code applicant to address the scope and renewal of ongoing fee arrangements, what ongoing services are to be delivered to clients and appropriate record keeping.

‘As we begin to assess code applications, we will work through a number of practical implementation issues with code applicants, licensees and their representatives,’ Mr Kell said.

‘We encourage code applicants to engage with us early on in the process and, as needed, we will give further guidance on our FOFA webpage.

‘Effective cooperation between all parties will be necessary for an approved code to work as an effective alternative to complying with the law.’

To read Regulatory Guide 183, click here.