The Financial Markets Authority (FMA) expects an ABS to describe where relevant “a breakdown on how you are remunerated or rewarded, including any base salary, bonuses, commission and fees. You should include percentages based on figures available for the last quarter or year...” In addition, an explanation should be provided around what potential conflicts of interest may arise and how you deal with those.
There needs to be consistency between the information in the ABS and the Secondary Disclosure Statement relating to how the adviser is remunerated. If there is a variance, then it is likely one of the two documents is incorrect and this could lead to a potential penalty. If the Disclosure Statement is incorrect, then an adviser could face a penalty under Section 117 of the Financial Advisers Act 2008 of up to $100,000 for an individual and up to $300,000 for an entity. If the ABS is the incorrect document, then the financial adviser could face a penalty under Section 126 of the Financial Advisers Act 2008 (breach of terms and conditions of authorisation) of up to $5,000.
The Strategi Guidance Note titled ‘Disclosure of revenue and remuneration in the ABS’ provides an explanation and example of how to disclose what product suppliers have been utilised and how the adviser is remunerated.
Strategi provides Guidance Notes to its compliance clients as part of the service package. Other financial advisers are able to purchase the ABS template and associated ABS Guidance Notes for a small fee. Contact Strategi to discuss your needs.
