The MDA regulations are changing – have you considered your approach?
A bit over a year ago ASIC issued ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968 and Regulatory Guide 179 which regulates the conditions under which managed discretionary account services (MDA services) can be provided. As with any updated regulations, there has been a transitional phase.
One of the big changes with these rules was that any licensee and adviser who wished to provide a managed discretionary account will require the relevant licence authorisation. Previously, ASIC had provided exemptions from the condition to hold such a licence authorisation, subject to certain conditions, commonly by issuing a ‘no action’ letter. This exemption has now been removed, with licensees and advisers given until October 2018 to apply for authorisations to provide an MDA service.
If you are currently operating under a ‘no action’ letter, you probably have already been considering what steps you may need to take. Obviously you need to make a decision on whether you need to apply for a licence variation to include MDA services as an authorisation. RG 179 specifically addresses this scenario, and does recognise your experience of operating under the ‘no action’ letter should you be considered as responsible manager on the licence. That said, lodging a licence variation and putting in place the relevant policies and procedures does take some time, in addition to any time ASIC may take to assess your licence variation. If this is your action plan, it is recommended that you consider lodging the variation in the next few months, giving yourself plenty of time to prepare for the changes.
Operating an MDA service comes with a number of conditions, some of them fairly straight forward, others a bit more complex. A lot will depend on what type of MDA service you wish to offer, what systems you may use, whether or not there will be loans linked to the MDA service, etc.
Even if you have already been operating under an MDA service authorisation, it is important to note that some requirements have changed and as of October 2017 are now in force. It is likely that a number of documents required an update, in particular the FSG, the MDA contract and your MDA procedures.
Given this is the first update to the regulations of MDA services since 2004, this is a great opportunity to consider your service offering. It is also a good time to assess your compliance arrangements of the MDA service and how this sits within your compliance framework.
Regardless of where you are at with your business, if you have any questions or concerns, MDA Guru may be able to assist. We understand the MDA rules and our focus is on assisting you in finding the appropriate solution for your business. Please feel free to contact us if you wish to further discuss your needs and obligations.