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Look harder at those transitional conditions, they are tougher than you think

I don’t think industry or advisers appreciate the impact of the two transitional FAP licensing requirements covering record keeping and internal complaints processes. People glance at them and think ‘that’s covered by what I do now’. It probably isn’t. Look closer:

Quote: “Records will be adequate if they clearly demonstrate (together with your systems, process and controls) how you, and any person engaged by you, and the regulated financial advice given to your retail clients by you or on your behalf, met the requirements relating to financial advice and financial advice services in the Financial Markets Conduct Act 2013, the Financial Markets Conduct Regulations 2014 and the Code of Professional Conduct for Financial Advice Services.”

This contrasts with the requirement in the current AFA Code of Professional Conduct which states “The information required to be recorded under this Code Standard in relation to each retail client must be sufficient to demonstrate compliance with Code Standards 5-10.”

So, in transition, which could be as early as next week for some adviser businesses, record-keeping expands from just looking at how your records demonstrate compliance with six Code standards to such records being able to demonstrate compliance with all of the relevant legislative, regulatory and new FAP Code provisions.

To quote from the submission completed on the proposed conditions by my compliance guru, Rob Dowler,

It is also useful to see it stated bluntly that this (record keeping) requirement is about demonstrating compliance rather than necessarily otherwise supporting good client outcomes, albeit one hopes that complying will assist in delivering good client outcomes, even while noting that it is entirely possible to deliver good client outcomes without otherwise maintaining documentation to prove compliance.”

The requirement for an Internal Complaints Process also extends beyond that outlined in the AFA Code to now require “complaints to be dealt with in a fair, timely and transparent manner”, which is entirely reasonable, but is again, an extension of the AFA Code requirement.

It is crystal clear that in this age of heightened focus on conduct these two conditions simply express an FMA expectation that these are standards that all financial service providers, not just transitionally licensed FAPs, should be focused on meeting.


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