From 1 December 2010, if you are authorised by the Regulator, and are an Authorised Financial Adviser (AFA), you have an obligation to comply with the Code of Professional Conduct for Authorised Financial Advisers (Code). This requires the disclosure statement of AFAs to not only comply with the requirements of the SMA 1988, but also with the requirements of the Code (in particular Code Standard 7), between the period they are authorised until 30 June 2011.
The information an AFA may be required to provide to a retail client under this Code Standard includes (but is not limited to) information about:
- Any limits on the scope of the AFA's financial adviser services.
- The AFA's qualifications to provide those services.
- The fees the client must pay.
- The benefits the AFA or any related person of the AFA will, or may receive.
- Any conflicts of interest the AFA may have, in relation to the AFA's financial adviser services provided to the client.
From 01 July 2011, Part 4 of the SMA 1988 will be repealed and the disclosure obligation for advisers will depend on whether the adviser is an AFA, a RFA (but not authorised) or a QFE adviser. These new disclosure obligations are prescribed in the Financial Advisers (Disclosure) Regulations 2010 and the Financial Advisers (Disclosure) Amendment Regulations 2011 and come into effect from 1 July 2011.
What triggers the requirement to amend the disclosure statement?
Where there is a material change to the content of the disclosure statement, the new disclosure statement should be provided to that client at the earliest opportunity and before further advice is provided or further investment money/property is received from the client. A disclosure statement will be considered out-of-date and in need of amendment if:
- There has been a material change in anything that must be disclosed in the disclosure statement; and
- A reasonable client would think that the change would materially affect their decision to take advice from the financial adviser, to follow the advice already given by the adviser, or to assess what weight they should give the advice; or
- A reasonable person engaging a broker would think that the change would materially affect any decision to proceed with giving investment money or property to the broker, or postpone or counter-demand the investment of investment money/property already received by the broker, but not yet invested.
Examples of material changes that would require a disclosure statement to be amended and given to the client include:
- The adviser becoming an RFA on or before 1 April 2011.
- The adviser becoming an AFA before 1 July 2011.
- The disestablishment of the Securities Commission and the establishment of the Financial Markets Authority (FMA) on 1 May 2011.
The golden rules of disclosure :
- Include full disclosure of mandatory legal obligations.
- Keep it simple and up-to-date.
- View your disclosure statement from a marketing point of view as well as a legal one. There is a lot of value in ‘getting in first‘ and handling objections before they arise.
- Obtain a client acknowledgement and signature on your disclosure statement and keep a copy on the client file.
How Strategi can help?
Strategi has developed an adviser disclosure statement template and comprehensive guidance notes which are available on request. We also offer an optional disclosure statement review and sign off service, to ensure that your disclosure statement complies with the requirements of the SMA 1988 and the Code.
Prices:
- Disclosure statement review - $300.00 + GST, per adviser (conditions apply) - this includes the Disclosure Statement template and guidance notes. We can also negotiate group/corporate rates.
- Disclosure Statement template and guidance notes only (without the review process) - $125.00 + GST.
Please contact Strategi to enquire about this service.
