Managed Discretionary Accounts (MDA)
RG 179: Managed Discretionary Accounts and ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968 sets out how ASIC will regulate the provision of MDAs to retail clients.
We have put together an overview of ASIC’s regulatory approach focusing on the MDA services typically provided by financial planners.
It is important that you read these regulatory documents to understand how the new requirements and the relief may apply to the specific MDA services you offer your clients, and consider seeking legal advice.
The following information is intended as a general guide only. The information is not intended to constitute professional or legal advice, and you should make your own enquiries and assessment.
The Financial Planning Association of Australia Ltd expressly disclaims any and all liability for any loss or damage arising from reliance upon any information in these FAQs.
Who do the new requirements apply to?
ASIC has defined three new key function titles in the provision of MDA services to retail clients:
- MDA provider – offers and trades in financial products, operates a custodian or depository service, and gives personal advice. May outsource some MDA services to external MDA advisers and external MDA custodians.
- External MDA adviser – provides personal advice on MDAs
- External MDA custodian – provides custody services related to MDAs
The obligations you may be required to meet, and the transition period for implementation, depend on the MDA function(s) you fulfil in providing the MDA service to your clients.
We have focused on the main MDA services currently provided by financial planners:
- Acting as an external MDA adviser
- Proving an MDA on a regulated platform
1. Acting as an external MDA adviser
An external MDA adviser is:
- Licensed to provide financial product advice to a retail client
- enters into a direct contract with a client to prepare and/or review a client’s MDA investment program
- the investment program is to be included in the MDA contract between the client and the MDA provider
- under the contract you are directly responsible to that client (not the MDA provider)
(Please note: If you are engaged by the MDA provider to prepare or review an investment program (ie, you do not enter into a direct contract with the client), you are considered an agent of the MDA provider and must meet additional requirements.)
Click on the links below for an overview of the external MDA adviser requirements:
Best interest obligations
Conflict management obligations
Providing an SOA
Non-limited recourse products
Annual review of the investment program
Fee Disclosure Statements
2. Providing an MDA on a regulated platform
CURRENT NO-ACTION RELIEF TO BE REMOVED
If you currently provide an MDA on a regulated platform holding a limited power of attorney permitting you to transfer funds between investments offered through the regulated platform, but not to contribute or withdraw funds, you would be operating under the current ASIC no-action letter.
The 2004 ASIC no-action letter will be removed.
Click on the links below for an overview of the new requirements to provide an MDA on a regulated platform, and the relevant transition arrangements:
The following is a summary (only). Please see the Instrument and RG179 for detailed requirements, and consider seeking legal advice.
New license authorisations and requirements
We are always keen to hear your valuable feedback and suggestions. Please let us know if there are any policy issues or concerns that affect you.