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MDA CHANGES – WHAT, WHEN & WHO?

MDA CHANGES – WHAT, WHEN & WHO?

How time has flown! We’re 6 months in to the revised MDA services framework, but what with Christmas and all, we’ve not seen much evidence of MDA providers changing their processes.

But the first deadline - for full service MDA providers - is approaching, people. It’s time to get your skates on!

Here’s the first of 4 blogs – this one looks at what full service MDA providers and financial advisers who recommend those MDA services need to do before 1 October 2017. You might like to start by refreshing your memory about the changes, which we explained in Changes to MDA Regulation.

NB: MDA providers who operate through a regulated platform have another 18 months before they need to operate in line with the changed requirements. But because you need to apply for a licence variation and it can take up to 9 months for variations to be processed by ASIC, you’d be well advised to start soon.

Licensed MDA Providers

Area Before 1 Oct 2017
FSG Incorporate the following additional information: Name and contact details of your external MDA adviser; Fees and costs (in similar format to a PDS)

  • Name and contact details of your external MDA adviser;
  • Fees and costs (in similar format to a PDS)
  • The risks of non-limited recourse products, if you use them
  • How the client can give instructions on corporate actions (if you permit them to do so – which most MDA providers don’t in our experience)
  • The operation of any outsourcing arrangements that apply to the MDA service
Investment Program Add enough information about the investment strategy to enable a reasonable retail client to decide if it is suitable for them.
MDA Contract

Incorporate the following additional material:

  • A clear description of the nature of the discretions you will be authorised to exercise A prominent warning about the key differences in acquiring a financial product directly and through an MDA service
  • A clear description of the nature of the discretions you will be authorised to exercise
  • A prominent warning about the key differences in acquiring a financial product directly and through an MDA service
  • How the MDA contract can be terminated and your policy for orderly exit from the MDA service
    Information about fees and costs – which can be cross referenced to your FSG.
Non-limited recourse products Obtain written client consent (which includes specific disclosures about the products and their risks) to invest in non-limited recourse products such as contracts for difference and leveraged OTC derivatives, if you use them.
SoA Review Implement procedures for reviewing SoAs that recommend your MDA services before entering into an MDA contract with the client.
Conflicts of interest Identify conflicts of interest arising from your MDA services and document your policies and procedures for dealing with them.
Asset holding Implement procedures for selecting and monitoring your custodian.
Outsource administration Implement procedures for selecting and monitoring your administration provider.
Termination procedures Implement procedures to ensure the orderly termination of MDA contracts.
 MDA Advisers – who advise on MDAs that are not operated through a regulated platform
Area Before 1 Oct 2017
FSG As your FSG does not need to include information about MDA services if you are not also an MDA provider, you may wish to revise it.
SoA Implement procedures to provide your initial SoA recommending the MDA service to the MDA provider, who needs to satisfy themselves that there is no reason to believe that the service is not appropriate for the client. Yes really!
Fee disclosure statement Check that your Fee Disclosure Statement correctly discloses the MDA advice fees. NB: If the investment management service is a centralised function which doesn’t provide personal advice to individual clients and charges a separate fee to your financial advice fees, you don’t need to include the investment management fee in your FDS.

Help from The Fold

The Fold’s template FSG material, MDA Advice and Contract Documentmaterial now incorporate all the new requirements. We’ve also prepared comprehensive policies and procedures for both MDA providers and MDA advisers.

Buy the whole MDA Kit and receive a % discount.

Contact us for advice about how the requirements apply to your MDA service, or for help in customising the templates for your business. We’d be delighted to help.

Author: Claire Wivell Plater

April 2017


 



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