Record keeping obligations
What is the existing record-keeping obligation?
ASIC Class Order [14/923] Record-keeping obligations for Australian financial services licensees when giving personal advice (the ‘principal class order’) imposes specific record-keeping requirements for Australian Financial Services (AFS) licensees when the licensee or their representative gives personal advice to retail clients.
AFS licensees must ensure that, in relation to the provision of personal advice, certain records are kept that demonstrate compliance with the best interests duty and related obligations. Records must be kept for a period of at least seven years after the day the personal advice is provided to the client.
What are the changes?
ASIC Corporations (Amendment) Instrument 2016/1006 (the ‘amendment instrument’) amends the principal class order. The amendment clarifies that, in addition to the record-keeping obligations imposed on AFS licensees, an authorised representative who provides personal advice must:
(a) give the advice records to the AFS licensee if the licensee requests the records, provided the request is made:
(i) in connection with the obligations imposed on the licensee under Chapter 7 of the Act; and
(ii) within seven years after the day on which the personal advice was provided to the client; and
(c) keep records for a period of at least seven years after the day personal advice was provided to the client, unless the records have been given by the authorised representative to the licensee.
How long do the obligations apply?
This obligations apply for seven years after the day on which the personal advice was provided to the client.
What does the clarified obligation apply to?
This obligation applies in relation to the provision of personal advice to a retail client by an authorised representative of an AFS licensee. We understand the obligation applies even to advice provided before the amendments commenced. This would mean the obligation applies for all personal advice provided to retail clients within seven years of the present.
Records of what matters must be given or kept?
Records of the following matters must be given or kept:
- the information relied on and the action taken by the advice provider showing they’ve acted in the client’s best interests in relation to the advice [if the safeharbour provision is being relied on to prove the best interests duty’s been satisfied, the records required are of the information relied on and the action taken by the advice provider that satisfies the steps in that provision];
- 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, there is a conflict between the client’s interests and the interests of the advice provider (or certain related parties of the advice provider)—the information relied on and the action taken by the provider to indicate that the advice provider has given priority to the client’s interests when giving the advice.
Do the obligations still apply after the authorised representative leaves their AFS licensee?
Yes, the obligations continue to apply even if the authorised representative ceases to be an authorised representative of the AFS licensee during the period that the records are required to be given or kept.
Are there any exemptions?
Yes, the record-keeping obligations do not apply to the provision of personal advice where the modified best interests duty applies.
[Source: ASIC Corporations (Amendment) Instrument 2016/1006 Explanatory Statement https://www.legislation.gov.au/Details/F2016L01647/Explanatory%20Statement/Text]