ASIC has issued Class Order [CO 14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice to give effect to the updated record-keeping obligations for AFS licensees and their representatives when giving personal advice to retail clients so that these refer to the Future of Financial Advice (FOFA) best interests duty and related obligations in Div 2 of Pt 7.7A. UPDATED VERSION
ASIC will give AFS licensees a transitional period of six months from the date the class order was made (12 September 2014) for licensees to comply with the updated record-keeping obligations.
The financial services licensee must ensure that records of the following matters are kept in relation to the provision of the personal advice:
- to prove that the best interests duty has been satisfied—the information relied on and the action taken by the provider that satisfies the steps in that subsection;
- the advice given, including the reasons why it would be reasonable to conclude that the advice is appropriate to the client, had the provider satisfied the best interests duty;
- where the provider knows, or reasonably ought to know, that there is a conflict between the interests of the client and the interests of an adviser the information relied on and the action taken by the provider to indicate that the provider has given priority to the client’s interests when giving the advice.
The financial services licensee must keep the records required for 7 years after the day the personal advice was provided to the client.
Keeping records will help licensees to supervise their representatives, including advice providers, when they provide advice to clients.
ASIC has decided not to proceed at this stage with specific record-keeping obligations for ongoing fee arrangements and fee disclosure statements, conflicted remuneration and intra-fund advice.
The requirement for AFS licensees to keep records is implied by the general duties imposed under s912A of the Corporations Act. The relevant duties of a licensee that imply such a record-keeping obligation include:
- the duty to ‘do all things necessary to ensure that the financial services covered by the licence are provided efficiently, honestly and fairly’ (s912A(1)(a));
- the duties to comply with the financial services laws and to take all reasonable steps to ensure its representatives comply with these laws (s912A(1)(c)–(ca));
- the duty to have an adequate dispute resolution system (s912A(1)(g)); and
- the duty to have adequate risk management systems in place (s912A(1)(h)).
