Compliance Arrangements - L4A library/Limited Au… · Web viewCompliance Manual for limited ......

Compliance Manual for limited Australian Financial Services

Licence (AFSL) Holders

Developed exclusively for members in public practice of CPA Australia and the Institute of Chartered Accountants Australia

DATE 9 October 2013

VERSION 1.0

DESCRIPTION Compliance Manual for limited Australian Financial Services Licence (AFSL) Holders

© HNLaw Pty Ltd (ACN 068 367 046), trading as Compact - Compliance & Training, and Holley Nethercote Commercial & Financial Services Lawyers developed this document in collaboration with CPA Australia and the Institute of Chartered Accountants Australia (the accounting bodies). HNLaw Pty Ltd is the owner of copyright in this document, first published in Australia in September 2013, and licences the accounting bodies to use the material for the benefit of their members. This document is provided to members under a limited licence from CPA Australia and the Institute of Chartered Accountants Australia and should only be used in accordance with the terms of that licence. The contents of this document does not constitute legal, financial or commercial advice, or a recommendation of any services or products. You should consider obtaining independent advice before making any investment, financial or legal decision.

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Limited AFS Licensee

Compliance Manual

Document Control:

Version 1.1

Manual created by: ______________________ on __________________Insert Name & Role Insert date

Last reviewed by: ______________________ on __________________Insert Name & Role Insert date

© HNLaw Pty Ltd, trading as Holley Nethercote Commercial & Financial Services Lawyers and Compact Compliance & Training, is the owner of copyright in this document, first published in Melbourne, Australia in September 2013. HNLaw Pty Ltd has provided the CPA and the ICAA with a licence to allow members of the CPA and the ICAA to use and amend this documentation for their internal use. The contents of this document does not constitute legal advice.

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1 Compliance Arrangements 21.1 About this manual.........................................................................................21.2 Organisational structure and reporting lines.................................................21.3 Compliance personnel..................................................................................21.4 Role, seniority and capabilities of compliance management personnel.......21.5 Compliance manager’s duty to ensure that compliance reporting is

complete and truthful....................................................................................21.6 Compliance Dates........................................................................................21.7 Compliance Committee [Optional]................................................................2

2 Notifying ASIC of breaches and events.................................................................22.1 Responsibility................................................................................................22.2 Overview.......................................................................................................22.3 Notifying ASIC of breaches...........................................................................22.4 Notifying ASIC of events...............................................................................22.5 ASIC reporting information...........................................................................2

3 Outsourcing...........................................................................................................23.1 Responsibility................................................................................................23.2 Overview.......................................................................................................23.3 Engaging a service provider.........................................................................23.4 Engagement checklist for outsourced providers...........................................23.5 Existing service provider...............................................................................23.6 Reviewing a service provider........................................................................2

4 Ensuring appropriate information in promotional material / advertising................24.1 Responsibility................................................................................................24.2 Overview.......................................................................................................2

5 Maintaining adequate financial resources and records and compensation...........25.1 Responsibility................................................................................................25.2 Overview.......................................................................................................25.3 Important details...........................................................................................25.4 Financial records procedure.........................................................................25.5 Financial resources procedure.....................................................................25.6 Compensation arrangements.......................................................................2

6 Dispute resolution..................................................................................................26.1 Responsibility................................................................................................26.2 Overview.......................................................................................................26.3 Dispute resolution procedure........................................................................26.4 Information Collection and Confidentiality....................................................2

7 Representatives.....................................................................................................27.1 Responsibility for representatives.................................................................27.2 Overview.......................................................................................................27.3 Appointing representatives checklist............................................................27.4 Monitoring and supervising representatives procedure................................2

8 Appointing a Responsible Manager and/or Key Person........................................28.1 Responsibility................................................................................................28.2 Overview.......................................................................................................28.3 Appointing a Responsible Manager checklist...............................................28.4 Replacing a Key Person...............................................................................28.5 Key Person succession plan.........................................................................2

9 Training..................................................................................................................29.1 Responsibility................................................................................................2

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9.2 Overview.......................................................................................................29.3 Training representatives procedure..............................................................29.4 Training Responsible Manager procedure....................................................29.5 Annual training and development plan for RG 146 compliant

representatives.............................................................................................29.6 Annual development plan for Responsible Managers..................................29.7 Representative training register....................................................................2

10 Checklists for client files........................................................................................210.1 Responsibility................................................................................................210.2 Overview.......................................................................................................210.3 Client File Checklist......................................................................................2

11 Risk management..................................................................................................211.1 Responsibility................................................................................................211.2 Overview.......................................................................................................211.3 Identifying new risks.....................................................................................211.4 Process.........................................................................................................211.5 Ongoing review.............................................................................................211.6 Risk register..................................................................................................211.7 Risk Action Plan............................................................................................2

12 IT resources...........................................................................................................212.1 Responsibility................................................................................................212.2 Overview.......................................................................................................212.3 IT resources procedure.................................................................................2

13 Human Resources.................................................................................................213.1 Responsibility................................................................................................213.2 Overview.......................................................................................................213.3 Human resources checklist...........................................................................2

14 Managing conflicts of interest................................................................................214.1 Responsibility................................................................................................214.2 Overview.......................................................................................................214.3 How to use this procedure............................................................................214.4 Conflicts of interest register..........................................................................2

15 Credit advice and credit referrals .........................................................................215.1 Responsibility................................................................................................215.2 Overview.......................................................................................................215.3 Credit which is caught by the Credit Regime................................................215.4 Credit activities.............................................................................................215.5 What you can and cannot say......................................................................215.6 What you can and cannot do........................................................................215.7 Referring Consumers to Credit Providers.....................................................2

16 The first client contact............................................................................................216.1 Provide and explain your Financial Services Guide (FSG)..........................216.2 Updating your FSG.......................................................................................216.3 The client engagement letter/agreement......................................................216.4 The fact finding process................................................................................216.5 Risk Profiling.................................................................................................216.6 Fact Finding after the first contact................................................................2

17 Giving Advice.........................................................................................................217.1 The advice ‘cheat sheet’...............................................................................217.2 Giving a Product Disclosure Statement (PDS).............................................217.3 When are you not giving advice?..................................................................2

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17.4 Non-advisory staff.........................................................................................217.5 When are you giving only ‘general’ advice?.................................................217.6 What types of clients do not have to receive an SOA or ROA?...................217.7 When giving personal advice to a retail client...............................................217.8 The five pillars of an SOA.............................................................................217.9 Other requirements for a SOA......................................................................217.10Full Advice with Limited Scope or incomplete information...........................217.11Record of Advice (ROA) – Further Advice...................................................217.12 Record of Advice – ‘hold’ / ‘no recommendation’ advice.............................217.13‘No advice’ or Execution only instructions....................................................217.14When it is not enough to simply provide a product brochure.......................217.15What you can give electronically..................................................................217.16Keeping a paper trail....................................................................................217.17What your file should contain.......................................................................217.18Conflicts of interest.......................................................................................217.19How do we manage conflicts of interest?.....................................................2

Working Document 1 - Compliance Diary....................................................................2

Working Document 2 - Compliance Committee Charter..............................................2

Working Document 3 - Incident Register......................................................................2

Working Document 4 - Breach Register.......................................................................2

Working Document 5 - Engagement checklist for outsourced providers......................2

Working Document 6 - Example letter to existing services provider............................2

Working Document 7 - Reviewing a service provider procedure.................................2

Working Document 8 - Promotional Material Checklist................................................2

Working Document 9 - PI Insurance Checklist.............................................................2

Working Document 10 - Complaints Register..............................................................2

Working Document 11 - Appointing representatives checklist.....................................2

Working Document 12 - Employee of a Licensee........................................................2

Working Document 13 - Register of Representatives..................................................2

Working Document 14 - Appointing a Responsible Manager Checklist.......................2

Working Document 15 - Annual training and development plan for RG 146 compliant representatives.............................................................................................................2

Working Document 16 - Annual development plan for Responsible Managers...........2

Working Document 17 - Representative training register.............................................2

Working Document 18 - Client File Checklist...............................................................2

Working Document 19 - Risk register...........................................................................2

Working Document 20 - Risk Action Plan....................................................................2

Working Document 21 - Human resources checklist...................................................2

Working Document 22 - Conflicts of interest register...................................................2

Working Document 22 - Warnings...............................................................................2

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Tailoring this manual (Delete this section once completed)

This is your compliance manual – please feel free to amend it, change the order and add more information about the way you do your business. You can incorporate the contents of this manual into other compliance documents that you use for your business.

You will need to carefully read this manual and also amend it, taking guidance from the sections in yellow.

The compliance manual will need to be updated regularly to reflect changes to your business and the law.

As many Limited AFS licensees who use this manual will be small operations we have named the Compliance Manager as the person responsible for the licensee’s compliance functions. You can change the responsibility to another person – but you must make sure the person you appoint is competent and has adequate supervision.

1 Compliance Arrangements

1.1 About this manualThis compliance manual outlines the responsibilities of ## 1(we, us, our, the Licensee) under its limited Australian Financial Services licence (AFSL). It provides processes, procedures and checklists to assist you (the reader), in complying with our (the licence holder’s) obligations under the financial services laws.

It tells you:

Our obligations – what needs to be done in light of the law and best practice.

Prohibited conduct – these activities constitute breaches of our policy.

Important information that will help you conduct your business.

The aim of compliance is to assist us to comply with our legal obligations.

[This outline should be tailored by you to reflect the arrangements of your business and must be updated every time there is a significant change in your compliance arrangements or organisational structure.]

1.2 Organisational structure and reporting lines

The Compliance Manager will ensure that any staff involved with compliance functions has the necessary qualifications, skills and experience to effectively fulfil their duties. The Compliance Manager is responsible for ensuring the adequacy of our compliance arrangements, for reporting any breaches to

1 Insert your Company name here.

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ASIC, and will report to the management or the board.

Every officer, contractor, agent and employee associated with us is required to comply with all aspects of the law at all times and to act ethically.

[insert organisational chart here]

1.3 Compliance personnel

1.3.1 Obtaining assistance Below is a list of persons who can be contacted to obtain information or with whom to discuss concerns.

1.3.2 Contacts [Insert officers of the licensee who may be contacted regarding compliance issues]The ongoing contact person for ASIC to contact in matters relating to our licence is: [insert name of compliance manager or other contact person].

1.4 Role, seniority and capabilities of compliance management personnel

[Insert name] is directly responsible for ensuring that we comply with our legal obligations. He/She:

is the Compliance Manager; [if applicable] is a Responsible Manager; [describe qualifications]; and [insert details of experience]

The role of the Compliance Manager includes:

monitoring compliance practices in the appointment, review or termination of staff;

advising any future partners or directors on the state of compliance with, or breaches of the Corporations Act 2001¸ the ASIC Act 2001, the Privacy Act 1988 and relevant ASIC Regulatory Guides and practice notes;

recommending to the management appropriate action to be taken where practices are found wanting;

monitoring regulatory changes that impact on the licensee’s operations and providing information and advice to management in a timely manner;

checking that staff, contractors and advisers are provided information in a timely manner in relation to changes within the licensee, changes in the industry and changes to regulatory requirements;

assessing at regular intervals documentation in relation to the licensee’s procedures, contracts with third parties, and this compliance manual to ensure that they remain current in relation to regulatory requirements as well as assisting us to improve our business; and

dealing with significant matters and issues raised in auditor reports and complaints summary reports.

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1.5 Compliance manager’s duty to ensure that compliance reporting is complete and truthful

The Compliance Manager is required to act honestly, exercise the degree of care and diligence that a reasonable person would exercise if they were in their position and not make use of information gained by being in their position to gain an improper advantage for themselves or anyone else or cause detriment to the company. This attitude of compliance is vital to the running of the business, and it is the Compliance Manager’s duty to ensure that all staff cultivate a positive attitude towards compliance.

The Compliance Manager is responsible for ensuring that complete and truthful reporting occurs. See the organisational table above to see reporting lines.

1.5.1 Organisational competenceThe licensee ensures that at all times it maintains its organisational competence to carry out its obligations under its AFS licence by following the procedures in this manual, and liaising annually and on an ‘as needs’ basis with external compliance consultants. In addition, external compliance reviews are conducted annually. ## also undertakes to review our organisational competence whenever our responsible managers or business activities change.

1.5.2 Other industry codes and standardsThe person responsible for ensuring that we comply with industry codes and standards other than the financial services regime is the Compliance Manager.

The industry codes and standards with which we must comply are:

o standards and codes promulgated by the Accounting Professional & Ethical Standards Board; and

o the standards developed by the Auditing and Assurance Standards Board; and

o the standards developed by the Australian Accounting Standards Board [delete if inapplicable]

o Insert others if required

This Compliance Manager ensures compliance with these codes and standards by:

keeping copies of relevant industry codes and standards on a shelf in the office [or accessed via xxx website/intranet] at [insert address/location] where they may be:o updated regularly; ando accessed by staff members;

subscribing to relevant information brokers and regularly accessing relevant websites so as to be informed of any changes to industry codes and standards;

conducting internal training or organising external training for staff members and authorised representatives regarding these other codes and standards; and

developing written procedures that reflect the requirements of these codes and standards.

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Our compliance with industry codes and standards other than the financial services regime is reviewed annually.

1.5.3 Managing informationTo help guard against risks of non-compliance, any representative who suspects that a compliance breach may have occurred is to report to the Compliance Manager.

The manager / partners meet [insert, eg. monthly] with representatives (including support staff) to discuss a range of issues and to share information regarding compliance and any systemic concerns.

1.6 Compliance DatesThe Compliance Manager is responsible for ensuring that reporting and review dates are followed. The Compliance Manager does this through the use of a Compliance Diary.

1.6.1 Compliance Diary[Please refer to “Working Document 1 – Compliance Diary”. This document is reproduced as a working document so that you may use it repeatedly. You may choose to set up an automatic diary system rather than using a paper-based word document.]

1.7 Compliance Committee [Optional] In order for the licensee to establish and maintain a healthy compliance culture, it has established a Compliance Committee that proactively addresses compliance issues, and monitors ongoing licensee obligations. The committee may include an external compliance consultant as the chair, in order to maintain an objective compliance perspective. The Compliance Committee is established pursuant to a Compliance Committee Charter.

1.7.1 Compliance Committee Charter[Please refer to “Working Document 2 – Compliance Committee Charter”. This document is reproduced as a working document so that you may tailor it and use it repeatedly.]

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2 Notifying ASIC of breaches and events

2.1 ResponsibilityThis procedure is reviewed every year by the Compliance Manager. In addition, if there is a major compliance breach in this area, the Compliance Manager shall review the relevant procedure, or an external compliance consultant is engaged to review the procedure.

2.2 OverviewA licensee has an obligation to notify ASIC of certain types of events and breaches.

This procedure contains 2 sections.

Section 2.3: Notifying ASIC of breaches. This involves identifying, assessing and recording breaches internally, as well as reporting breaches deemed ‘significant’ to ASIC; and

Section 2.4: Notifying ASIC of events. This involves reporting other necessary information (e.g. change of business address) to ASIC.

2.3 Notifying ASIC of breachesThis procedure is separate and in addition to any breach reporting procedures imposed on the licensee by other licensees or principals under any binder or other agreement.

Section 912D of the Corporations Act provides that:

1. if we breach (or are likely to breach) any of the specified obligations; and2. that breach or likely breach is ‘significant’ having regard to a number of

prescribed factors, 3. then we must give a written report to ASIC as soon as practicable, and in any

case within 10 business days of becoming aware of the breach or likely breach.

Sometimes, representatives of ## report issues which may not constitute a breach of the financial services laws, but are still a breach of ## policies or processes. In this event, the issue is called an “incident”. The Compliance Manager will determine whether or not this constitutes a breach of the financial services laws.

2.3.1 Training and communicationAll staff are trained in compliance obligations and are required to report any possible breach of any obligation under the financial services laws to the Compliance Manager.

Breaches or potential breaches are discussed [insert period] when the Compliance Manager meets with the representatives. All representatives have access to this manual. If they become aware of a breach or a likely breach, they must immediately discuss it with the Compliance Manager, who will complete the breach register.

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Is the breach “significant” according to the 4-step test?Report the Breach to ASIC within 10 business day of it being identified.

YES YES

NO NO

AND

Record in Incident Register, including details of remediation.Record in Breach Register, including details of remediation.

STEP 1 Is it a breach of the financial services laws?



Incident identified. Is it a breach of the financial services laws or your AFSL?

The licensee and all representatives understand that failing to report a significant breach to ASIC within 10 business days of the licensee becoming aware of it constitutes a separate breach of the licence.

2.3.2 The Breach Reporting Process – summaryThe Compliance Manager ensures that breaches and incidents are reported and follow the process as illustrated below.

2.3.3 Step 1: An incident has been discovered. Is it a breach of the financial services laws or our AFSL?

The financial services laws include:

doing all things necessary to ensure that the financial services covered by our AFS licence are provided efficiently, honestly and fairly;

complying with the conditions on our licence;

managing conflicts of interest;

having adequate resources to provide the financial services covered by our licence and to carry out supervisory arrangements;

being competent to provide the financial services covered by our licence;

having trained and competent representatives;

taking reasonable steps to ensure that our representatives comply with the financial services laws;

having a dispute resolution system for retail clients;

having adequate risk management systems; and

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having compensation arrangements for retail clients.

The financial services laws also include the following legislation:

Chapter 5C of the Corporations Act (Managed investment schemes); Chapter 6 of the Corporations Act (Takeovers); Chapter 6A of the Corporations Act (Compulsory acquisitions and buy-outs); Chapter 6B of the Corporations Act (Rights and liabilities in relation to Chapter 6

and 6A matters); Chapter 6C of the Corporations Act (Information about ownership of listed

companies and managed investment schemes); Chapter 6D of the Corporations Act (Fundraising); Chapter 7 of the Corporations Act (Financial services and markets); Chapter 9 of the Corporations Act (Miscellaneous), but only as it applies in

relation to the Chapters of the Corporations Act listed above; Division 2 of Part 2 of the ASIC Act (Unconscionable conduct and consumer

protections in relation to financial services); and other Commonwealth Acts specified in reg 7.6.02A in so far as they cover

conduct relating to the provision of financial services. These are:

Australian National Registry of Emissions Units Act 2011 Banking Act 1959 Carbon Credits (Carbon Farming Initiative) Act 2011 Clean Energy Act 2011 Financial Sector (Collection of Data) Act 2001 Financial Sector (Shareholdings) Act 1998 Financial Sector (Transfer of Business) Act 1999 Insurance Acquisitions and Takeovers Act 1991 Insurance Act 1973 Insurance Contracts Act 1984 Life Insurance Act 1995 Retirement Savings Accounts Act 1997 Superannuation Industry (Supervision) Act 1993 Superannuation (Resolution of Complaints) Act 1993.

Our AFSL conditions can be found at [insert location, eg. on server or in hard copy in a particular office].

If a breach of the financial services laws or the AFS licence has been identified, proceed to Step 2.

If there has been a breach of internal procedure or policy only, then this is an incident (not a breach) and should be recorded on the Incidents Register at 2.3.6.

2.3.4 Step 2: Record the breach.It is the responsibility of the Compliance Manager to record all breaches and likely2 breaches in the Breach Register at 2.3.7 below.

It is also the responsibility of the Compliance Manager to record and file all correspondence and information which relates to any particular breach.

2 The licensee is likely to breach an obligation if it knows or suspects that it is not going to be able to comply with an obligation in the future.

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If the breach is a significant breach (or likely breach), then proceed to Step 3.

Using the breach register will assist to determine if the breach (or likely breach) is significant.

2.3.5 Step 3: Reporting to ASICIt is the responsibility of Compliance Manager to report significant breaches and other necessary information to ASIC.

The Compliance Manager will:

1. contact the Licensee’s external compliance service providers or its lawyers for advice, or its accounting body (if it is decided that this is necessary);

2. prepare a written report to ASIC, using FS 80, available at http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/fs80.pdf/$file/fs80.pdf . Much of the information which has been recorded in Step 2 of this procedure should be included in or attached to FS 80; and

3. send the written report to:a. PO Box 4000 Gippsland Mail Centre VIC 3841; orb. [email protected]

FS 80 cannot be submitted via the online licensee’s portal.

2.3.6 Incidents Register[Please refer to “Working Document 3 - Incident Register”. This document is reproduced as a working document so that you may use it repeatedly.]

2.3.7 Breach Register[Please refer to “Working document 4 - Breach Register”. This document is reproduced as a working document so that you may use it repeatedly.]

2.3.8 Ongoing analysis of breachesAn analysis of the existing breach reports, including tracking their progress, is important in ascertaining the spread, depth and trends of any similar breaches. From the analysis, systemic issues, representative behaviours or inappropriate misconduct can be identified, reported (if significant) and corrected. The Compliance Manager will ensure ongoing analysis of past breaches occur on a three monthly basis.

2.4 Notifying ASIC of eventsRepresentatives are trained in compliance obligations and are required to report any relevant event listed below to the Compliance Manager.

ASIC must be notified of any of the following events:

any event that may make a material adverse change to the licensee’s financial position;

change in control of the licensee; change in licensee’s name, principal business address or ABN; changing Responsible Managers, dispute resolution or compensation details; change in “key person” named on the licence;

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http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/fs80.pdf/$file/fs80.pdf

variation to authorisations and other conditions of an AFS licence; authorising or revoking an authorised representative; changing an authorised representative’s name, principal business address,

directors (if a company) or ABN; annual profit and loss statement and balance sheet; auditor report on the profit and loss statement and balance sheet; appointment of auditor (unless public company); consent to remove auditor; or change of auditor.

These events are set out in the ASIC reporting information page (see 2.5).

The Compliance Manager will: be familiar with which events must be reported to ASIC (listed above); contact the external compliance service providers for advice (if it is decided that

this is necessary); and check the ASIC reporting table to determine when and how the information must

be provided to ASIC.

2.5 ASIC reporting informationSome types of events and breaches must be reported to ASIC within a particular timeframe. Different periods of time and different fees and forms are associated with each event or breach. ASIC has compiled these requirements into a ‘reporting page’. The page’s contents change from time-to-time as the law and ASIC policy changes. That is why the page must be regularly reviewed.

The Compliance Manager will review the page at http://www.asic.gov.au/asic/asic.nsf/byheadline/Lodgement+requirements+for+Australian+financial+services+licensees?openDocument

on a three-monthly basis and ensure that the lodgement requirements are met.

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3 Outsourcing

3.1 ResponsibilityThis procedure is reviewed every year by the Compliance Manager. In addition, if there is a major compliance breach in this area, the Compliance Manager will review the relevant procedure, or an external compliance consultant is engaged to review the procedure.

The Compliance Manager is responsible for overseeing this area.

3.2 OverviewThis procedure deals with parts of the business that are outsourced. A summary of the outsourced services are provided in the table below.

3.2.1 Outsourced servicesService outsourced

Service provider

Who monitors the provision of the service

How frequently

Method of monitoring (eg. inspection)

Type of current agreement (eg. written contract)

Eg training provider

annually

3.3 Engaging a service providerWhen engaging a new external services provider, the Compliance Manager will complete a copy of the ‘engagement checklist for outsourced providers’ (see below). The Compliance Manager will file the completed copy of the checklist with the contract of engagement for the service provider in a ring binder marked ’Outsourcing’.

3.4 Engagement checklist for outsourced providers

[Please refer to “Working Document 5 – Engagement checklist for outsourced providers”. This document has been reproduced as a working document so that it can be used repeatedly.]

3.5 Existing service providerIf the service provider already provides services to the licensee at the commencement of the licence, it is difficult to add new terms to the agreement. Accordingly, an ‘example letter to existing services provider’, (see below), should be provided to the existing service provider.

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3.5.1 Example letter to existing services provider[Please refer to “Working Document 6 – Example letter to existing services provider”. This document has been reproduced as a working document so that it can be used repeatedly.]

3.6 Reviewing a service providerOnce an external service provider has been engaged, the Compliance Manager must conduct an annual review of the external service provider and the licensee’s arrangement with the provider. The Compliance Manager will conduct their review based on the checklist below.

3.6.1 Reviewing a service provider procedure

[Please refer to “Working Document 7 – Reviewing a service provider procedure”. This document has been reproduced as a working document so that it can be used repeatedly.]

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4 Ensuring appropriate information in promotional material / advertising

4.1 ResponsibilityThis procedure is reviewed every year by the Compliance Manager. In addition, if there is a major compliance breach in this area, the Compliance Manager shall review the relevant procedure, or an external compliance consultant shall be engaged to review the procedure. Similarly, if ASIC updates the guidance in relevant regulatory guides, including RG 234, this procedure will be reviewed in line with that new guidance.

The Compliance Manager is responsible for overseeing this area. This procedure should be followed before any promotional material is used.

The Compliance Manager may also elect for any promotional material to be checked with the licensee’s external compliance/legal services provider before it is published or circulated.

4.2 OverviewPromotional material / advertising must comply with the financial services laws and the licensee’s licence conditions. The licensees procedures also comply with ASIC’s guidance in RG 234.

Advertising and promotional material covered by this procedure include [add or delete materials as appropriate]:

the internet (e.g. website, video streaming - YouTube, social networking and microblogging - twitter)

business cards, letterhead, with compliments slips brochures Financial Services Guide print advertisements TV advertisements radio advertisements outdoor advertising (e.g. billboards) direct mail (e.g. post, email, facsimile) telemarketing group presentations and seminars [other]

When reviewing advertising and promotional material, the Compliance Manager will use a copy of the following checklist (see below). Then the Compliance Manager will keep the completed copy of the checklist with a copy (or proof) of the corresponding advertising or promotional material in a ring binder marked ‘Advertising and Promotional Material’. If the Compliance Manager prepared the advertising and promotional material, the Compliance Manager must organise for another person to complete the review. Ideally, the other person should be part of the licensee’s senior management and have knowledge of promotional material/advertising compliance requirements.

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4.2.1 Promotional Material Checklist[Please refer to “Working Document 8 – Promotional Material Checklist”. This document has been reproduced as a working document so that it can be used repeatedly.]

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5 Maintaining adequate financial resources and records and compensation

5.1 ResponsibilityThis procedure is reviewed every year by the Compliance Manager. In addition, if there is a major compliance breach in this area, the Compliance Manager will review the relevant procedure, or an external compliance consultant is engaged to review the procedure.

The Compliance Manager is designated to oversee this area and to ensure that records are kept up to date.

5.2 OverviewAs licensee, we understand that:

maintaining adequate financial records is a condition of our licence;

maintaining adequate financial resources is a condition of our licence; and

maintaining adequate compensation arrangements is a condition of our licence.

5.3 Important detailsOur accountant is: [insert name]

Our financial year ends in: [insert month]

5.4 Financial records procedure The Licensee understands its obligations under RG 166.

Office cheques issued by the business need only 1 signatory.

We do not receive cash

Financial records are managed pursuant to the following/attached procedures: [describe procedure, attach documents or refer to office manual].

Financial records are reviewed and updated [Daily/weekly/monthly ].

A software package called [name of software] is used to record financial transactions.

Rolling three monthly projections are maintained at all times, and produced and stored electronically and in hard copy.

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The licensee or its accountants maintain records which demonstrate at any given time that the licensee has positive net assets and is solvent.

To ensure that only authorised fees and expenses are charged to a client and that the fees and expenses are calculated correctly, the following procedures are followed: [insert procedures] .

The Compliance Manager monitors these obligations by: checking our financial records quarterly; meeting with our accountant quarterly; [insert other] .

The Compliance Manager is responsible for statutory deadlines for reporting.

Other procedures include [insert as required]

5.5 Financial resources procedure One way that the licensee monitors its financial resources, is by including it as

an agenda item on its Compliance Committee meetings [Delete this if you do not have compliance committee meetings].

The licensee at all times has positive net assets and is solvent.

The licensee has sufficient cash resources to cover the next 3 months' expenses with adequate cover for contingencies. These contingencies are documented.

The Compliance Manager ensures that reports are produced regularly, or when significant changes occur, on whether the licensee is complying with its financial obligations.

The Compliance Manager reports to the [insert responsible person or group - eg.the Board] after certain reports are produced so that the latter can ensure compliance with financial requirements.

The licensee prepares and lodges annually with ASIC an Annual Compliance Certificate.

The licensee prepares and lodges annually with ASIC a profit and loss statement, a balance sheet and an audit report using the required forms (FS70)

If the representative finds that the financial obligations have been breached they will report immediately to the Compliance Manager and take any action required. See Procedure 2: Notifying ASIC of breaches and events.

The licensee ensures compliance with its financial obligations by [insert measures in place] .

The Compliance Manager manages these obligations by: checking the state of our financial resources quarterly; meeting with our accountant [insert period, eg. quarterly] [insert other]

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[Insert other procedures which must be followed, or attach a maintenance/review procedure which must be followed by the designated responsible person]

5.6 Compensation arrangements

The Compliance Manager is the Compliance Manager who is responsible for following this procedure.

The licensee provides financial services to retail clients. As a result, it is required to hold adequate professional indemnity (PI) insurance cover to compensate clients for any loss or damage they suffer because of the licensee breaching its licence obligations. The licensee decides what level of cover is adequate in light of various considerations listed in the checklists below and taken from the Corporations Regulations 2001.

Each year, upon renewal of the licensee’s PI insurance policy, and in the event of a major change to the licensee’s business, the Compliance Manager for the licensee completes the Working Document described below in order to determine what level and type of cover will be appropriate. If there are major changes to any elements of the checklist, the Compliance Manager will complete a new version of the checklist, determine whether the level of cover should be altered and, if so, proceed with implementing the change in cover.

The Compliance Manager will diarise when the licensee’s PI insurance policy is due for renewal.

The Compliance Manager may obtain the assistance of an external adviser, such as an insurance broker, in completing the checklist and determining what is adequate cover for the licensee However, the licensee realises that it is ultimately responsible for ensuring that its level of cover is adequate.

The Compliance Manager requires the licensee’s PI broker to confirm in writing, that any quoted or renewed policy complies with the current requirements of ASIC Regulatory Guide 126.

Completed checklists for determining adequate PI insurance and any supporting documentation (including a copy of the PI Schedule, Terms and Conditions) are kept in a ring binder marked ‘PI insurance’.

Financial Services Guide (FSG) Disclosure The licensee ensures that its Financial Services Guide describes what compensation arrangements it has in place, using the required wording:

The licensee has Professional Indemnity Insurance in place to cover itself and its representatives for the financial services we provide. We believe that the cover is adequate to meet its requirements as an Australian Financial Services licensee.

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Other compensation arrangements not required under its licence but nevertheless maintained by the licensee are:[List arrangements].

5.6.1 PI Insurance Checklist: [Please refer to “Working Document 9 – PI Insurance Checklist”. This document has been reproduced as a working document so that it can be used repeatedly. Much of the information is drawn from Table 3 and Table 4 in RG 126]

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6 Dispute resolution

6.1 ResponsibilityThis procedure is reviewed every year by the Compliance Manager. In addition, if there is a major compliance breach in this area, the Compliance Manager shall review the relevant procedure, or engage an external compliance consultant to review the procedure.

The licensee acknowledges the importance of having an effective and efficient complaints handling framework. The licensee adopts a customer-focused approach, is open to feedback, and demonstrates its commitment in its actions and the resources it makes available to dispute resolution.

All complaints or disputes should be referred immediately to the Compliance Manager. The Compliance Manager has sufficient training and competence to deal with complaints or disputes. They also have the authority to settle complaints or have ready access to the person who has the necessary authority to settle complaints. Accordingly, the Compliance Manager will ensure that the following system is in place to handle complaints genuinely, promptly, fairly and consistently.

The Compliance Manager also ensures that all staff who deal with customers (including new and existing staff) has an understanding of the complaints handling procedure and are familiar with the dispute resolution procedure. Policies and procedures are available to all of these staff and training will be conducted at least annually (with records of this training maintained in the licensee’s training register) to ensure that all staff are familiar with these procedures.

The Compliance Manager will introduce, where necessary, procedural changes, disciplinary action or training that may be required as a result of the complaint.

6.2 OverviewThe licensee defines a complaint as an expression of dissatisfaction made to us, related to our services, or the complaints handling process itself, where a response or resolution is explicitly or implicitly expected.

This definition and this procedure have been developed with reference to the Essential Elements of Australian Standard 10002-2006 and the minimum requirements of ASIC’s RG 165.

There is no charge payable by a complainant for making a complaint to the licensee.

A compliant may also involve a breach of the financial services laws or a condition of the licence.

6.3 Dispute resolution procedure

This procedure is available to retail clients and is referred to in the licensee’s relevant disclosure documents. A summary of this procedure is provided to a client when they make a complaint. Where necessary the information in this procedure will be made available in alternative formats.

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The Compliance Manager will be responsible for notifying the professional indemnity insurer of any complaint, if this is required by the professional indemnity insurance policy.

6.3.1 Internal procedureAll complaints (or potential complaints) should firstly be referred to the Compliance Manager, if possible. Wherever possible, a complaint should be investigated by a staff member who is not involved in the subject matter of the dispute.

The licensee ensures that it has simple and accessible arrangements for making complaints. Accordingly, complaints do not need to be in writing. They can be made by phone, email or in person. Also, at the time a complaint is made, the Compliance Manager will offer the complainant some assistance with making their complaint if required. For example, where a complainant’s literacy skills are limited or they have legitimate special needs, assistance will be given with filling in forms or expressing their complaint.

Where the complaint is resolved to the complainant’s satisfaction within one business day from when the complaint was received, this full process need not be applied in its entirety and the complaint does not need to be added to the complaints register.

Oral complaintsThe following procedure must be followed when a complaint is received orally:

1. Identify yourself, listen, record details and determine what the complainant wants.

2. Confirm the details received.

3. Empathise with the complainant in a courteous manner.

4. Explain the courses of action available.

5. Do not attempt to lay blame or be defensive.

6. Resolve the complaint if possible or commit to doing something immediately, irrespective of who will ultimately handle the complaint.

7. Don’t create false expectations.

8. Inform the complainant of the name and contact details of the person who will be formally dealing with the complaint (i.e. the Compliance manager Officer).

9. Refer the matter immediately to the Compliance Manager (even if you resolved the matter).

10. Record the date and time of complaint/enquiry into the complaints register (see example Complaints Register at 6.4.1).

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[Ensure this process is consistent with the procedures set out in the licensee’s PI insurance policy]

Written complaints, and follow on from oral complaintsWhere a complaint is received, it must be date stamped and registered in the Complaints Register by the Compliance Manager or other authorised person. Details that need to be recorded on the Complaints Register include the following:

Client name Date received Financial product or service complained about Brief details of complaint Action taken and decisions made (remedy, determination, result)

Following the registration of the complaint, a written acknowledgement of receipt will be sent to the complainant immediately or as soon as practicable. The letter will inform the complainant that the complaint will attempt to be resolved within 45 days. The letter will outline the dispute resolution process and the availability of"[insert EDRscheme, eg. FOS]" , including relevant contact and membership details, should the matter not be resolved to the person’s satisfaction. The letter will include documentation from [the EDR scheme] outlining their complaints handling process.

The Compliance Manager will then consider the complaint and seek appropriate supporting information and advice, where necessary, within 7 calendar days.

The request for additional information or clarification from the complainant must clearly state that the complainant’s response is required within 14 calendar days to comply with the stipulated response times.

The Compliance Manager will ask the client to sign file notes where possible of relevant conversations to confirm they contain a complete and accurate record of the complaint and subsequent negotiations.

During this period the Compliance Manager will check all correspondence addressed to the complainant prior to it being sent.

Until a complaint is finalised, the Compliance Manager will remain responsible for:

o maintaining contact with the complainant to ensure that they are informed of the progress of their complaint;

o ensuring that the complaint is continued until either a final decision is made, or the complaint is dropped by the complainant;

o maintaining the Complaints Files, including copies of all enquiries, information, documentation, investigations and decisions; and

o liaising with the Licensee’s professional indemnity insurer.

Remedies

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Within 45 days of receiving the complaint, the Compliance Manager will provide the complainant with a final written response. This will consist of one of the following:

accept the complaint and, where appropriate, offer redress; offer redress without accepting the complaint; or reject the complaint, giving reasons.

The final written response must state the complainant’s right to take their complaint to the licensee’s external dispute resolution scheme and provide the external dispute resolution scheme’s contact details. You do not need to provide a final written response if the complaint is resolved to the complainant’s complete satisfaction by the end of the fifth business day after the complaint was received and the complainant did not requested a response in writing (but your records should clearly record these facts).

When determining the licensee’s response, the Compliance Manager must consider the complaint in an objective and fair manner. When considering the appropriate remedy, the Compliance Manager will consider:

relevant legal principles; relevant codes of conduct; fairness; and relevant industry best practice.

Where appropriate, the Compliance Manager will provide the client with a remedy, which may include:

rectification; apology; refund; compensation; replacement; and/or action to ensure that other clients have not or will not be affected.

The sooner a complaint is responded to, the greater the chance of resolving it internally. Complaints should be resolved internally as soon as practicable or in any case within 45 days of lodgement of the complaint by the customer. Complaints will be addressed in accordance with its urgency. This may require complaints being prioritised.

Where there are special circumstances relating to the complaint such that it is not reasonable for it to have been resolved in that period, the Compliance Manager must inform the complainant of the reasons for the delay and that the complainant may refer it to the "[insert EDR scheme, eg. FOS]" .

When responding to a complaint, the Compliance Manager should give written reasons for their decision on the complaint, and adequately address the issues that were raised in the initial complaint. Where appropriate, the written reasons should refer to applicable provisions in legislation, codes, standards or procedures.

The Compliance Manager will obtain legal advice if necessary.

Monitoring

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The Compliance Manager will be responsible for monitoring the Complaints Register from time to time, depending on the existence or frequency of complaints. The Compliance Manager will ask the following questions:

Are there systemic problems, trends, patterns, issues or conduct? Are they being addressed? Are problems being reported to the Compliance Manager in a timely manner? Are the complaints being handled efficiently and fairly?

The Compliance Manager ensures that all staff who deal with customers have an understanding of the complaints handling procedure.

The Compliance Manager is responsible for both maintaining all complaints handling data, and also for analysing the data according to various categories such as:

type of complainant; subject of complaint; outcome of complaint; timeliness of response; and breaches of law, such as

failure to provide relevant disclosure documentation; failure to disclose remuneration; failure to provide adequate advice; misleading conduct; inappropriate advice; and failure to meet consumer protection standards or codes of conduct; fraud; or [insert other ].

The Compliance Manager will report complaints handling data, including details of decisions made and actions taken in respect to complaints, at [forum(s) and period(s), eg monthly compliance committee meetings and quarterly directors meetings].

6.3.2 External ProcedureThe licensee is required to be a member of an external dispute resolution organisation. The Licensee has membership with "[insert EDR scheme, eg. FOS]" , membership number [insert number] . If membership with this scheme is changed or cancelled, the Compliance Manager will notify ASIC within 3 days of becoming aware of the alteration, pursuant to this manual (see procedure 2: Notifying ASIC of breaches and events).

The Compliance Manager will diarise when the membership is due for renewal.

The Compliance Manager will liaise with "[insert EDR scheme, eg. FOS]" and ensure full cooperation with it.

6.4 Information Collection and Confidentiality

CollectionComplaints must be recorded and maintained in the licensee’s complaints register, along with supporting documentation where relevant. The register must be stored in

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a secure location and each complaint must be maintained in this register for at least 7 years from the date that the complaint is received.

ConfidentialityPersonally identifiable information relating to the complainant and their complaint should be available where needed for the purpose of addressing the complaint within the organisation.

Any statistical data based on the licensee’s complaints register which is communicated outside of the organisation or within the organisation for a purpose other than addressing the complaint must be cleansed of any personally identifiable information.

6.4.1 Complaints Register[Please refer to “Working Document 10 – Complaints Register”. This document has been reproduced as a working document so that it can be used repeatedly.]

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7 Representatives

7.1 Responsibility for representativesThis procedure is reviewed every year by the Compliance Manager. If there is a major compliance breach in this area, the Compliance Manager shall review the relevant procedure, or an external compliance consultant is engaged to review the procedure.

7.1.1 Responsibility for appointing representativesThe Compliance Manager is responsible for using the ’appointing representatives’ checklist (see 7.3), for maintaining the representatives register (see 7.4.11) and applying the selection criteria contained in it when assessing an application to become a representative of the licensee.

Copies of the checklist should be made whenever a representative is appointed. The completed checklist should be dated and filed in an employment/engagement file for that representative. The relevant ‘Scope of Authority’ certificate must be provided to the new representative, and a copy held on file (see 7.4.3 of this procedure).

The licensee can appoint ‘authorisers’ – that is, authorised representatives who can in turn appoint sub-authorised representatives. Authorisers are typically employers which authorise (subject to the licensee’s approval) some of their employees. They are usually corporate entities and are also referred to as ‘corporate authorised representatives’. The licensee may also appoint authorised representatives who are not entitled to sub-authorise further representatives. All appointments must be authorised by the licensee. If you want to appoint authorised representatives, speak to CPA Australia or the Institute for guidance.

7.1.2 Responsibility for monitoring and supervising representativesThe Compliance Manager is responsible for using the ‘monitoring and supervising representatives’ procedure (see 7.4) and applying the selection criteria contained in it when assessing an application to become a representative or authorised representative of the licensee.

7.2 OverviewUnder the Corporations Act 2001, “representative” means: an authorised representative; an employee or director of the licensee; an employee or director of a related body corporate of the licensee; or any other person acting on behalf of the licensee.

‘Representatives’ include all staff of the licensee, including support staff and other staff who do not provide financial services.

The licensee is responsible under its licence for:

appointing representatives; and monitoring and supervising representatives;

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in a way which ensures, as far as practicable, that the licensee and its representatives do not breach its licence conditions and/or the financial services laws.

Recruitment of new representatives is outsourced, and the outsourced provider’s details are as follows: [OR] Recruitment of new representatives is undertaken by the licensee.

7.3 Appointing representatives checklist [Please refer to “Working Document 11 – Appointing Representatives Checklist”. This document has been reproduced as a working document so that it can be used repeatedly.]

The licensee ensures that the employee is aware of the scope of their authority, by using an ‘authorisation form’. This form is given to all representatives who provide financial services on behalf of the licensee. [note: these forms are not required if you use employment agreements that include the scope of AFSL authorisation as a schedule to the agreement. If you want to appoint non-employee representatives to provide services on your behalf, they will need to be appointed as authorised representatives, and you will need an authorised representative agreement. Contact CPA Australia or the Institute for guidance on this point]

7.3.1 Authorisation – Employee of Licensee[Please refer to “Working Document 12 – Employee of a Licensee”. This document has been reproduced as a working document so that it can be used repeatedly.]

7.4 Monitoring and supervising representatives procedure

7.4.1 ReviewThe Compliance Manager ensures that representatives who provide financial product advice are subject to an annual review, conducted by the licensee’s external compliance auditors. They will assess:

provision of personal advice (and use of personal advice checklist); understanding of key regulatory terms; understanding of conflicts of interest; understanding of breach reporting; FSG, SOA and PDS timing issues; ongoing compliance with RG 146; and [insert other or delete items as appropriate]

Each representative will have an internal performance review and appraisal on a yearly basis. This process includes:

feedback on the representative’s performance in light of the licensee’s compliance procedures, including file-keeping;

advice giving; and [insert other or delete items as appropriate]

This performance review and appraisal will be conducted by [insert position/name of reviewer] .

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7.4.2 When dealing with clientsEach representative providing personal advice is required to provide a pro forma warning to clients if advice is based on incomplete or inaccurate information.

Each representative providing personal advice will obtain the client’s authority to proceed before starting to implement any personal advice given.

The nature of the client base being serviced by our representatives is [insert what kinds of clients you have] . Management maintains an awareness of who makes up the client base by meeting monthly with representatives.

Each representative understands the requirement to provide each client with an FSG. The procedure of the licensee is as follows: [insert procedure, eg. “included in a new client welcome pack”]

When personal advice is given, representatives provide each retail client with an SOA. This is ensured by: [insert procedure, eg. “the Compliance Manager conducting spot-checks on

files”]

All representatives are required to keep a record of contact with clients, by putting file notes into each client's file after each contact.

7.4.3 AuthorityThe licensee ensures that representatives act within the scope of their authority by:

notifying them in writing upon appointment of the scope of their authority annual internal reviews conducted by compliance staff; and annual external review conducted by external compliance consultants.

The ‘authorisation’ form which is given to representatives when they are appointed is updated when these authorisations change (see 7.3.1 of this procedure).

7.4.4 RemunerationThe remuneration structure for representatives includes the following:

base salary; commissions, which are determined by the following formulas [eg. client-based,

performance based, training linked – please insert details] ; [insert other].

The licensee ensures that representatives properly disclose all fees and commissions to their clients by checking its FSGs and SOAs with its external compliance consultant.

7.4.5 Ongoing monitoringThe Compliance Manager is responsible for ensuring that ongoing monitoring occurs, including:

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annual internal reviews conducted by compliance staff; and annual external review conducted by external compliance consultants;

and [insert period] professional development days; and annual conference; and compliance staff randomly sitting in on client meetings (with client

consent); and ongoing training provided to advisers and support staff who provide

advice documents [insert other]

[Note, you may amend the above list, or have separate lists, depending on whether your adviser-representatives are internal and/or externally located.]

The Compliance Manager conducts regular reviews and spot checks to ensure that adviser representatives:

undertake a satisfactory needs and risk analysis of their clients provide appropriate warnings, including general advice warnings and warnings for

incomplete or inaccurate information by providing a ’personal and general advice’ checklist for them to follow

only recommend appropriate classes of product that are covered by the licensee’s authorisations

provide appropriate verbal and written disclosure use appropriate disclosure documents to document advice use promotional material appropriately understand basic financial services regime terminology uses the advice checklist at the front of all client files (see below); act in the bests interests of the client; and provide financial services efficiently, honestly and fairly.

Informal meetings between representatives and management are conducted [insert period] in order to provide feedback to representatives.

7.4.6 Complaints and breachesIf a complaint is received about a representative, the licensee considers whether one of these options would be appropriate:

restricting the representative’s authority organising further training or special supervision reprimanding them cancelling their authorisations; and terminating their employment or engagement.

If a representative causes the licensee to breach its legal obligations, or is otherwise not complying with the licensee’s policy or directions from time to time, the Compliance Manager will take appropriate action in the circumstances. This may require the Compliance Manager to do any or all of the following:

follow the breach reporting procedure restrict the representative’s authority organise further training or special supervision reprimand them cancel their authorisations; and

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terminate their employment or engagement.

The repercussions of causing a compliance breach are outlined in each representative’s employment contract.

In order to identify breaches, in addition to the ongoing monitoring processes outlined above, representatives report to the Compliance Manager, every [insert period] by [insert method, eg. writing a report / attending informal meetings.] The report will include:

whether the representative is aware of any breaches or likely breaches of the licence;

[insert other]

When a representative suspects that there may have been a compliance breach, they must immediately report it to the Compliance Manager (see Procedure 2).

7.4.7 Cross endorsementIf a representative is also a representative of another licensee, the licensee and the other licensee must each give their consent to the other’s authorisation of the representative, in writing. This is known as cross-endorsement. A copy of the licensees’ written consent must be kept on the representative’s file.

The Compliance Manager will ensure that the other licensee is, where appropriate, kept appraised of any relevant information regarding the representative and will liaise with the other licensee to determine whether it becomes aware of any relevant information regarding the representative which would affect the licensee’s decision to continue the appointment of the representative.

7.4.8 TrainingCompliance arrangements are communicated to new staff in induction training and to current staff in annual training.

(see Procedure 9: Training)

7.4.9 CommunicationCompliance arrangements are communicated to existing representatives by internal memorandum, email or training sessions (as necessary):

at regular intervals (e.g. as training sessions and potential development days) when there is a change in the law when there is a change in the products and/or services the licensee is authorised

to offer when there is a change in our AFS licence conditions; or when a systemic breach has been identified. [insert other]

7.4.10 Keeping a Register of RepresentativesThe licensee maintains a Representatives Register in order to keep track of who our representatives are and what role(s) they perform, and to ensure that they are appropriately authorised.

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7.4.11 Representatives Register[Please refer to “Working Document 13 – Register of Representatives”. This document has been reproduced as a working document so that it can be used repeatedly.]

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8 Appointing a Responsible Manager and/or Key Person


8.2 Overview

8.2.1 Responsible ManagersA Responsible Manager is a person (or people) on whose expertise the licensee relies to meet the organisational competency obligations imposed on all licensees.

The current nominated Responsible Managers are: [insert name] ; and [insert name]

These people are directly responsible for significant day-to-day business decisions about the ongoing provision of financial services by the licensee. They are in a position to determine how the financial services will be provided and are able adequately to supervise the provision of those services, although they need not actually provide them.

The Compliance Manager will ensure that each of the Responsible Managers meet the requirements of ASIC’s RG 105, by appointing Responsible Managers pursuant to the checklist set out in 8.3.

8.2.2 Key Person [delete if n/a]The above named Responsible Managers are also Key Persons, because ASIC has determined that the business relies heavily on them. They are named in the actual licence conditions.

The key person condition is designed to ensure that the licensee will only continue to operate with the involvement of Responsible Managers who satisfy the organisational expertise obligations.

The risk of replacing a Key Person is included in the risk register.

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8.3 Appointing a Responsible Manager checklist[Please refer to “Working Document 14 – Appointing a Responsible Manager Checklist”. This document has been reproduced as a working document so that it can be used repeatedly.]

8.4 Replacing a Key Person

It is the responsibility of the Compliance Manager to advise ASIC when a Key Person is no longer with the licensee – within 5 business days.

It is a condition of the licensee’s licence that ASIC must be notified of the following matters within five business days of the ’Key Person’ ceasing to be a Responsible Manager of the licensee or to perform duties on behalf of the licensee a. who is no longer a Responsible Manager

b. the date the Key Person ceased working for or on behalf of the licensee

c. the name, address and date of commencement, educational qualifications and experience of the new replacement Responsible Manager or Key Person

d. if the licensee does not have a replacement Responsible Manager or Key Person, detailed reasons as to why it has not nominated a replacement; and

e. a detailed description of how the licensee will continue to comply with the Act and the conditions of its AFS licence after the Key Person stops working for or on behalf of the licensee.

8.5 Key Person succession plan

The licensee’s contingency plan is:

[insert plan for how Key Person will be replaced. For example, training up certain representatives to become extra Responsible Managers is a standard way that Key Person succession is planned]

[insert other procedures]

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9 Training

9.1 Responsibility

This procedure is reviewed every year by the Compliance Manager. In addition, if there is a major compliance breach in this area, the Compliance Manager shall review the relevant procedure, or an external compliance consultant is engaged to review the procedure.

9.2 Overview A licensee must ensure that its representatives are competent to provide the financial services covered by the licence at all times. ’Representatives’ includes directors and employees of the licensee (whether or not they provide financial services), as well as authorised representatives.

The licensee is also required to ensure that Responsible Managers update and maintain their expertise.

9.3 Training representatives procedure

The tasks and functions that most* of the representatives perform under the licence include:

[insert other and delete inapplicable]

Representatives provide advice to:

retail clients (approximately [insert]% of the business’s clients); wholesale clients (approximately [insert]% of the business’s clients).

*Although most of the representatives provide financial services, there is a small number of employee representatives who undertake administrative functions only and are not authorised to provide financial services.

9.3.1 Identifying knowledge and skillEach representative must perform their tasks pursuant to the licence conditions and ASIC requirements.

The appropriate knowledge and skill requirements required to competently perform advice-giving tasks and functions are found in ASIC Regulatory Guide 146 Licensing: Training of financial product advisers.

The Compliance Manager identifies and records the knowledge and skill requirements for each representative.

9.3.2 Monitoring and supervising of training needsAny natural person who provides advice to retail clients must meet the requirements of Regulatory Guide 146. The licensee acknowledges that each representative has different tasks and duties. Accordingly, the Compliance

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Manager will provide tailored monitoring and supervision to each representative, in relation to their individual tasks and duties.

This is done by:

initial assessment and ongoing review by the Compliance Manager; [insert other]

All RG 146 compliant representatives are subject to an annual review at which time a training and development plan is prepared for the next year (see pro forma at 9.5). At this time, consideration is also given to the adviser’s performance over the preceding year and whether the objectives from the previous training and development plan have been met.

A copy of the annual RG 146 training and development plan is kept on the representative’s file. A further copy is provided to the representative. Each time any representative (whether or not they are authorised to provide financial services) undertakes any kind of financial services-related training, the Compliance Manager will ensure that the licensee receives a report or results of assessment demonstrating that the representative has successfully completed the training. This will be included in the training register.

9.3.3 Maintaining representative training recordsThe licensee ascertains the training that each representative has reached before becoming a representative of the licensee – insofar as such training relates to the provision of financial services.

This is established by obtaining:

the representative’s curriculum vitae verification of qualifications with the relevant academic or educational institution; copies of any certificates, such as diplomas.

Copies of these documents are kept in the representative’s file.

The licensee knows the level of ongoing financial services-related training of each of its representatives by keeping a training register (see pro forma at 9.7). A training register is maintained for every representative of the licensee. Each register covers a one year period. When the period is completed, a new register is commenced for the representative for the next year. Registers are kept in respective representative files.

The licensee makes it clear to representatives that it is their responsibility to keep the licensee informed of all training which they complete which relates to the provision of financial services.

9.3.4 Ongoing review consultant The Compliance Manager will assess the ongoing training needs of the representatives.

The ongoing training and review will be organised by the Responsible Person, and will ensure that the representatives act in accordance with the scope of their authorisations. Any non-compliance by the representatives, with either the licence

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conditions or with ASIC requirements, will result in a review by the Compliance Manager, who will determine the appropriate sanction, having regard to:

the terms of the representatives’ agreements with the Licensee relevant legislation; and ASIC Regulatory Guides.

The review will also review the nature and extent of each representative’s authorisations, and make recommendations as to any changes to the authorisations, and also in relation to any additional training to be undertaken by the representatives.

9.3.5 Identifying suitable trainingThe Compliance Manager identifies suitable training programs by:

regularly researching available training courses through relevant industry body websites;

reviewing representatives’ needs; considering the items listed in the pro forma training and development

plan for RG 146 compliant representatives (see pro forma at 9.5); [insert other]

9.3.6 Training plan and minimum training requirementsRepresentatives of the licensee are required to undertake continuing training of at least [insert number] hours per year.

Training is provided:

at regular intervals in relation to technical issues and industry developments; when there is a regulatory change which affects the representatives and/or the

way they provide their financial services; or [insert other]

Regardless of any other requirements, representatives will be provided with training on the relevant financial services laws at least annually.

The Responsible Person:

reviews training registers to check that they correlate with individual training plans identifies gaps or weaknesses in the preceding year and areas needing further

training; and provides feedback sessions with the representative about their performance.

9.3.7 Organisational trainingIn addition to product training, general financial services training and industry development, training will be conducted in relation to the following:

the licensee’s licence conditions risk management complaints handling and dispute resolution; and compliance requirements.

Even representatives (eg. administration staff) who do not give advice will receive organisational training, and the Compliance Manager will maintain training registers for them.

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[Insert further measures]

9.4 Training Responsible Manager procedure Responsible Managers maintain adequate skills and competence by:

reviewing all training courses undertaken and ensuring that at least one of the 5 alternatives in RG 105.44 are satisfied

attending relevant seminars and workshops for continued professional development

having access to adequate resources (internet and newspapers); and

subscribing to relevant newsletters.

The development offered to Responsible Managers includes:

the Compliance Manager assessing training needs and the timing of ongoing training

a development plan and training register being maintained for each Responsible Manager (see 9.6 and 9.7)

internal and external training and assessments

ensuring that a minimum [insert hours]of training per year is undertaken; and

documentary evidence of all training conducted being kept in a training register, in the same way as is done for representatives (see 9.7 below).

The training needs of Responsible Managers are analysed yearly by:

reviewing training records

identifying any areas where training is required

ensuring those areas (if any) are addressed; and

where Responsible Managers give advice to retail clients, reviewing the Responsible Managers’ competence against the requirements of RG 146.

The licensee ensures its organisational competence by conducting yearly reviews of the following to ensure that they continue to be appropriate:

the knowledge and skills of current Responsible Managers the number of Responsible Managers in the organisation its processes for the training and ongoing experience of Responsible Managers;

and its processes for the maintenance and updating of Responsible Managers’

expertise.

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9.5 Annual training and development plan for RG 146 compliant representatives

This plan must be kept in each RG 146 compliant representative’s file. A copy should also be provided to the representative. If desired, plans can also be generated for non RG 146 compliant staff.

[Please refer to “Working Document 15 – Annual Training and Development Plan for RG 146 Compliant Representatives”. This document has been reproduced as a working document so that it can be used repeatedly.]

9.6 Annual development plan for Responsible Managers

Each Responsible Manager must have a development plan. For Responsible Managers who are RG 146 compliant, this may overlap with the RG 146 training and development plan.

[Please refer to “Working Document 16 – Annual Development Plan for Responsible Managers”. This document has been reproduced as a working document so that it can be used repeatedly.]

9.7 Representative training register

Records of training must be kept for every representative of the licensee – insofar as the training relates to the provision of financial services. Use this register to do this.

[Please refer to “Working Document 17 – Representative training register”. This document has been reproduced as a working document so that it can be used repeatedly.]

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10 Checklists for client files


10.2 Overview1.1.1 These checklists can be attached to the front of each client file where personal advice

is provided. They only need be attached when there has been or will be the provision of advice to retail clients. For any type of client, advisers must keep a detailed paper trail.

Numerous copies should be made of this checklist. Alternatively, many of these steps may be already incorporated in a pro forma Statement of Advice.

10.3 Client File Checklist [Please refer to “Working Document 18 – Client File Checklist”. This document has been reproduced as a working document so that it can be used repeatedly.]

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11 Risk management

11.1 ResponsibilityThis procedure is reviewed every year by the Compliance Manager. If there is a major compliance breach in this area, an external compliance consultant is engaged to review the procedure. The Compliance Manager ensures this procedure is followed.

The risk management assessment is conducted by the Compliance Manager.

It is undertaken every 12 months, or sooner if new risks are identified. The risk management assessment should be completed in consultation with stakeholders.

The licensee’s governing body must sign off on all risk management measures.

11.2 OverviewThis procedure has been developed with reference to Australian Standard AS/NZS ISO 31000:2009. Please refer to that document for more information on risk management systems. You may already have an existing risk management framework developed in light of APES 325: Risk Management for firms. You may wish to combine these two working documents.

This procedure is a dynamic procedure that includes instructions as to how the responsible person(s) can conduct a risk management assessment of the business. Regulatory and operational risks should be considered.

11.3 Identifying new risksIn the Risk Register (see 11.6 below), there are some common risks which face many businesses, most of which are risks of non-compliance identified by ASIC. The list does not cover everything.

The licensee has an ongoing obligation to update and add risks to this risk register to cover all the risks which it faces.

The Compliance Manager maintains the risk register, covering all the risks which face it.

To identify further risks, first, think of the organisation’s goals and objectives. For example, one goal is to comply with obligations under the financial services licence. Another goal is to make a profit. This is called ’identifying the context’. Second, think of threats to these goals. As inspiration, use:

experience records systems analysis industry consultation; and audit and other recommendations.

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Each time you consider what can happen, also consider how it can happen. This is called ’identifying the risk’. You should also consult stakeholders that have appropriate knowledge to assist you to identify risks.

Each time you identify a risk, you should also identify a risk owner who has the accountability and authority to manage the risk.

In the risk register, describe each of the risks you have identified.

11.4 ProcessTo assess and plan for these risks, follow the process below. Consider one risk at a time. While you are doing steps 1 to 3, imagine you have no measures in place to control the risk. As you complete each step, enter your results into the Risk Register, a working document which is reproduced at 11.6 below.

11.4.1 Step 1: Determine the likelihood of the risk occurringUse this table and record your result (a number from 1 to 5) in the “Likelihood” column in the Risk Register.

Level Descriptor Description

5 Almost Certain Is expected to occur at some time4 Likely Will probably occur based on previous experience3 Possible May occur at some time2 Unlikely Could occur at some time but chances remote1 Rare May occur only in exceptional circumstances

(Remember, how likely is it that the risk will occur in the absence of any controls?)

11.4.2 Step 2: Determine the consequences of the risk occurring

Use this table and record your result (a number from 1 to 5) in the ’Consequences’ column of the Risk Register.

Level Consequence Example5 Extreme High regulatory impact, high client impact, financial

loss in excess of [insert for your business, eg. $2m], major effect on operations and on-going viability, greater than 10% impact on targets, adverse media attention, continuation of business jeopardised

4 Major High regulatory impact, enforcement action by regulator, medium client and staff impact, potential for legal action, financial loss up to [insert for your business, eg. $2m], major effect on operations, up to 10% impact on targets.

3 Moderate Regulatory impact, medium client and staff impact, financial loss up to [insert for your business, eg.$100k], some effect on operations, up to 5% impact on targets.

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2 Minor No regulatory impact, low client impact, financial loss up to [insert for your business, eg.$10k], no effect on operations, up to 1% impact on targets

1 Insignificant No regulatory impact, no client or staff impact, no financial loss, no impact on targets

11.4.3 Step 3: Determine the rating for the inherent risk Use the ratings you have found for likelihood and consequences to find an ’inherent risk rating’ on this table. This rating tells you how big the risk is regardless of any measures you have to control it.

Consequences

Like

lihoo

d

Ratings 1 2 3 4 55 S H H H H4 S S H H H3 M M S S H2 L L M S S1 L L L M S

H = High S = Significant M = Medium L = Low

This rating is automatically calculated in the “Rating” column of the Risk Register.

11.4.4 Step 4: Identify existing controls already in placeNow, identify the controls you have in place to reduce the likelihood and effects of the risk. For example: in relation to risk number 1 you might have a contingency plan for the sudden departure of a key person. Describe these controls in the ’Existing controls’ column of the Risk Register. If there is not enough space, attach further pages.

11.4.5 Step 5: Rate your controls – how good are they?Rate your controls using the following table. Write the rating (a number from 1 to 4) in the ‘Existing controls rating’ column of the Risk Register.

Level Descriptor Description4 Excellent System is effective in reducing risk, responsibility clear,

well documented, regularly reviewed3 Good Systems and documentation in place but room for

improvement2 Fair Some controls in place but incomplete1 Poor /

UnsatisfactoryAd hoc and poorly documented processes, or no controls at all

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11.4.6 Step 6: use matrix to determine a rating for the riskFind a ‘Risk priority rating’ for the risk. Use the inherent risk rating (in the ‘Rating’ column of the Risk Register), the control rating (in the ‘Existing controls rating’ column of the Risk Register) and this table:

Existing ControlsIn

here

nt R

isk Ratings 1 2 3 4

H H H S MS S S M LM M M M LL L L L L

The ‘Residual Risk Rating’ is automatically calculated in the risk register. This tells you how big the risk is to you, considering the controls you already have in place.

11.4.7 Step 7: do you need to take action?Using your ‘Risk priority rating’ refer to this table to determine what action you need to take and assist you to prioritise treating unacceptable levels of risk:

Level Descriptor DescriptionH High Immediate action required with ongoing active

managementS Significant Review of existing controls requiredM Medium Controls in place but require regular reviewL Low Risk of little concern and/or effective controls in place

11.4.8 Step 8: Risk Action Plan (if required)If you decide the risk is too high, and you think it wise to put more controls in place, take the appropriate action using the Risk Action Plan below (see 11.7). Ensure that any staff member responsible for a Risk Action Plan understands what is expected of them.

11.5 Ongoing reviewMonitoring and review of the risk management assessment should be conducted every 12 months or sooner if new risks are identified. During the monitoring and review process, The licensee will:

review the progress of Risk Action Plans

ensure that our controls are designed and operating effectively

meet with our stakeholders to ensure that any new risks are identified and reported

reflect on past events (including near-misses), changes, trends, successes and failures

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identify changes to our risk criteria and the risk itself which may require revision of risk treatments and priorities; and

identify emerging risks.

We keep a documented record of any risk management monitoring and reviews activities.

11.6 Risk register [Please refer to “Working Document 19 – Risk register”. This document has been reproduced as a working document so that it can be used repeatedly. It is also reproduced as a Microsoft Excel file titled “Risk Register [date]” . We strongly recommend that you use the Excel document rather than the Word document extracted as Working Document 19.]

11.7 Risk Action Plan [Please refer to “Working Document 20 – Risk action plan”. This document has been reproduced as a working document so that it can be used repeatedly.]

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12 IT resources


The Compliance Manager is the ’Responsible Person’ for ensuring that the licensee’s IT systems and communication are adequate to support the licensee ##’s current and future operational needs.

The Compliance Manager is responsible for managing a disaster if it occurs.

12.2 OverviewThis checklist procedure is reviewed and updated regularly.

12.3 IT resources procedure

Contact details

##’s IT support provider is: [insert details] .

##’s telephone support provider is: [insert details] .

##’s internet service provider is: [insert details]

Their contact details are: [insert details] .



Their performance is reviewed annually, using the outsourcing checklist.



12.3.1 IT security Data is protected by:

o firewalls o anti-virus programso daily/weekly/monthly backupso weekly/monthly/ off-site backups; ando passwords.

Access to physical IT infrastructure is restricted by:o [eg. restricted access to server room]

Additional to the above, ## has the following network (internet, WAN, LAN) security controls in place:

o [insert controls]

Unauthorised IT system access, once discovered, is to be immediately reported to [insert IT person and contact number] .

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12.3.2 Disaster recovery The proper operation of backup procedures (firewalls, anti-virus and backup

systems) is tested annually.

The licensee’s disaster recovery/business continuity plan is:o [insert or attach plan to this procedure as an appendix. It should cover off

on IT failure, natural disasters (fire, flood, etc), and other possible disasters that would restrict or inhibit access to IT resources ]

12.3.3 Performance The satisfactory performance of the contracted IT personnel is assessed bi-

annually by the Responsible Person.

There are measurable service level targets in these contracts, which include:o [list]

The IT system’s effectiveness is reviewed annually by the Compliance Manager in consultation with the licensee’s IT service provider. Methods of review include:

o measuring downtimeo measuring response timeo comparing to standards and benchmarkso assessing complaints about the IT system, whether made by staff, clients

or the service provider)o assessing use of legacy IT systemso considering the number of people using the system; ando [insert other].

Software effectiveness is reviewed annually by the Compliance Manager in consultation with the licensee’s IT service provider. Methods of review include:

o measuring downtimeo comparing to standards and benchmarkso assessing the currency of hardware and softwareo considering the quality and relevance of applications used; ando [insert other].

The communications systems effectiveness is reviewed annually by the Compliance Manager in consultation with the licensee’s IT, ISP and telephone service providers. Methods of review include:

o measuring downtimeo comparing to standards and benchmarks; ando [insert other] .

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13 Human Resources


13.2 OverviewThese procedures aim to ensure that there are sufficient human resources to cover all business activities, including compliance. It is necessary to demonstrate that the licensee has an adequate number of people and that all human resources are appropriately suited to conducting the activities carried on by the licensee (See also Procedure 8 - Appointing a Responsible Manager and/or Key Person in this manual).

13.3 Human resources checklist [Please refer to “Working Document 20 – Human Resources Checklist”. This document has been reproduced as a working document so that it can be used repeatedly.]

13.3.1 RecruitmentThe Compliance Manager will oversee the recruitment processes. Recruitment processes apply for representatives, Responsible Managers and key persons. These are outlined in other procedures.

Recruitment is outsourced to [insert provider] [OR] recruitment is dealt with internally by [insert name] .

The process for employing all staff is: obtain police, ITSA, credit and reference checks; obtain [insert type of information required] from the applicant; the person responsible for approving the appointment is [insert name] ; and the person responsible for training the new recruit is [insert name] .

The Compliance Manager will ensure that the recruitment, induction and training processes are compliant with the relevant laws and AFS licence conditions. If necessary, this will include liaising with the licensee’s external compliance provider.

The licensee’s general office procedures for appointing representatives are documented in: this manual (or set of procedures); and [insert other office manuals, etc] .

13.3.2 Monitoring and supervisingThe Compliance Manager will supervise any representatives who are involved in compliance failures, and will ensure their awareness of their ongoing compliance obligations.

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The Compliance Manager will monitor staff performance and provide ’on the job feedback during [weekly/monthly/bi-annual] meetings.

The Compliance Manager will conduct yearly appraisals. The appraisals will be conducted in the following manner: [describe how YOUR business conducts appraisals]

The Compliance Manager will appoint, where possible, a mentor for any new staff.

13.3.3 Allocating staff resourcesThe Compliance Manager reviews the adequacy of staff resources dedicated to: providing financial services, and overseeing the provision of financial services (e.g. Compliance staff). This assessment is done [insert period] at Compliance Committee meetings, and annually or following any compliance breach.

The Compliance Manager will ensure client accounts continue to be managed appropriately during staff absences. This will involve ensuring that there is at all times at least one other person who can perform any role within the organisation. It will also involve effective computerised diary systems and good file management by every staff member involved in providing financial services.

The Compliance Manager will ensure that, in the absence of a representative, at least one other person will be able to perform the absent representative’s tasks.

The Compliance Manager will ensure at all times that there are a number of representatives adequate to satisfactorily run the business, and will identify key indicators of representative inadequacy, which include:

client complaints about the quality of customer service or financial product advice; overloaded staff or complaints from staff; a low ratio of compliance staff to adviser and/or dealing representatives; insufficient number of compliance staff to conduct a periodic (e.g. annual) review

of representatives who give personal advice to retail clients; client accounts and interests not being monitored when staff are absent; a large number of inexperienced staff (for example, staff who have worked for the

business for less than six months); a large number of vacant positions; and [insert other].

13.3.4 Retrenchment and redundancyThe licensee has in place appropriate processes for staff retrenchment and redundancy. These processes include

[outline processes or refer to a separate procedure]

14 Managing conflicts of interest

14.1Responsibility

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The Compliance Manager has access to all necessary resources and personnel to carry out this procedure properly.

The licensee understands that it is responsible for its own conduct and that of its representatives. Representatives (including employees, directors and authorised representatives) are free at any time to contact the Compliance Manager to discuss matters which relate to conflicts of interest.


14.2 OverviewThis procedure aims to ensure that the licensee’s conflicts of interests are adequately managed, as required by the Corporations Act 2001, s912A(1)(aa). The procedure also is modelled on ASIC’s Regulatory Guide 181 and assists in providing financial services honestly and fairly as required by s912A(1)(a). You are also required to comply with APES 110 – Code of Ethics for Professional Accountants.

‘Conflicts of interest’ are circumstances where some or all of the interests of the licensee’s clients are inconsistent with, or diverge from, some or all of the interests of the licensee’s business and any other businesses under the licence. This includes actual, apparent or potential conflicts of interest.

Reference to clients includes both retail and wholesale clients.

The licensee recognises that conflicts of interest may be managed by:

a) controlling conflictsb) avoiding conflicts; and c) disclosing conflicts.

Records of conflicts of interest will be kept for at least 7 years. This includes:

reports given to senior management scripted oral disclosure [delete if n/a] records of online disclosure (e.g. on website) [delete if n/a] the conflicts of interest register below; and any other documentation relating to disclosure.

Note: These documents can be stored electronically.

14.3 How to use this procedureCopies of file notes, compliance review feedback and any other documentation which relates to conflicts of interests is to be kept together with the Conflicts of Interest Register in a ring binder.

The Compliance Manager will provide a written report to the Compliance Committee [delete or change to what fits your business] on a [insert period] basis.

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14.3.1 Conflicts of interest are controlled in the following way:The Compliance Manager:

identifies the conflicts of interest assesses and evaluates those conflicts; and implements an appropriate action (e.g. disclosing or avoiding the conflict).

Identification of a conflict occurs by [insert period, eg. monthly] review of business operations by the Responsible Person, and annual review by the Compliance Manager and/or an external Compliance Auditor.

The Compliance Manager must ensure that conflicts of interest records are up to date, and that conflicts of interest are disclosed in the necessary documentation (e.g. FSGs and SoAs).

14.3.2 Updating an SoA An SoA must comply with the disclosure requirements of the Corporations Act 2001 (the Act). When a new conflict of interest arises that could be seen as being capable of influencing the advice given, this must be included in the SoA. If there is any doubt as to whether an interest is a conflict of interest under the Act, legal advice shall be sought.

In addition to including relevant conflicts in an SoA, all conflicts of interest should be set out in the register below. Some of the above conflicts must also be disclosed elsewhere, in documents such as FSGs and PDSs.

14.3.3 Retail v wholesale clientsIn many instances, we expect that disclosure of the particular conflict will adequately manage the conflict and enable us to provide the financial services honestly and fairly. Accordingly, we require our representatives to provide all clients, whether retail or wholesale, with an FSG.

14.3.4 Updating an FSG An FSG must comply with the disclosure requirements of the Act. When a new conflict of interest arises, this must be included in the FSG to the extent it could be considered to be capable of influencing the providing entity in providing the services. If there is any doubt as to whether an interest is a conflict of interest under the Act, legal advice shall be sought.

14.4 Conflicts of interest register [Please refer to “Working Document 22 – Conflicts of Interest Register”. This document has been reproduced as a working document so that it can be used repeatedly.]

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15 Credit advice and credit referrals

15.1ResponsibilityThe person responsible for this procedure (Procedure) is the Compliance Manager.


The Compliance Manager must ensure that, where required, relevant staff members and representatives receive training on this Procedure.

15.2OverviewThe National Consumer Credit Protection Act 2009 established an Australian Credit Licensing system for people who engage in credit activities in Australia. If you engage in credit activities, you need to apply to ASIC for an Australian credit licence (ACL), or be properly authorised as a credit representative.

The Licensee does not hold an ACL. Accordingly, the licensee and its representatives are prohibited from engaging in credit activities as defined by the Act unless those activities are exempt pursuant to the National Consumer Credit Protection Regulations 2010 (Cth) (the Regulations).

This Procedure tells you what you can and can’t say and do when it comes to credit activities. The Procedure outlines three key elements:

1. the types of credit which are caught by the Australian credit licensing regime (Credit Regime);

2. what you can and cannot say and do (keeping in mind that we do not have an ACL); and

3. how to refer clients to a credit licensee.

15.3Credit which is caught by the Credit Regime

The Credit Regime only captures consumer credit where all of the following elements are satisfied:

1) the debtor (e.g. your client) is a natural person or strata corporation; and

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Consumer credit

Credit activities

Must hold an ACL or be a

credit representative

2) the credit is provided wholly or predominantly (greater than half) for;

a) personal, domestic or household use, orb) to purchase, renovate or improve residential property for investment

purposes (this is the only investment purpose ‘caught’); and

3) a charge (or fee) is made (or can be made) for providing the credit; and

4) the credit provider (e.g. the bank) is in the business of providing credit in Australia (they usually are).

The Credit Regime does not apply to credit:

which is not provided to a natural person or strata corporation (e.g. advice to a company, or advice to a self managed super fund trust where the trustee is a corporate entity);

that is predominantly for investment purposes; or

that is for a commercial or industrial investment property.

15.4Credit activities You are prohibited from engaging in credit activities related to consumer credit. A credit activity is either:

1. providing credit under a credit contract or consumer lease (e.g. home loan or credit card contract); or

2. providing a credit service (see below).

15.4.1 Credit providerA credit provider is the provider of credit under a credit contract (e.g. a bank providing a mortgage to a consumer). The licensee does not provide credit. [if you provide credit – you probably will need an ACL and this procedure does not apply to you]

15.4.2 Credit ServiceYou provide a credit service if you:

1. provide credit assistance; or

2. act as an intermediary.

15.4.2.1 Providing Credit AssistanceCredit assistance is provided when you either:

1. suggest that a consumer apply for a particular credit contract, increase their credit limit, or remain in a particular credit contract; or

2. assist a consumer to apply for a particular credit contract, increase their credit limit in a particular credit contract.

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’Suggesting’ is when you propose the idea to, or introduce it into the mind of, a consumer. Suggesting includes offering a consumer advice or making a recommendation that a consumer apply for, increase, or remain in a particular credit contract. Naming or discussing a particular credit product also includes naming or discussing a particular credit provider who only offers a very limited range of products.

15.4.2.2 Acting as an IntermediaryActing as an intermediary is where you act as a middle person between a lender and a consumer, whether directly or indirectly, with aim of obtaining credit for the consumer. This includes passing on information as the result of a request by a consumer to obtain credit. Credit assistance and acting as an intermediary can overlap and are not mutually exclusive.

Making referrals is sometimes considered to be acting as an intermediary, where this is done for the purpose of securing credit.

15.5What you can and cannot sayThe table (below) summarises the type of advice that you can and cannot provide (i.e. what is caught and not caught by the Act).

Category of Advice

You Can Examples You Cannot Examples

Apply for a credit product

Suggest to apply for credit without referring to a particular credit product or credit provider

Suggest to approach a range of credit providers who offer a range of credit products

‘obtain a loan for your investment property’

‘obtain a loan for your investment property. Suitable lenders include Westpac, ANZ and CBA’

Suggest to apply for a particular credit product with a particular credit provider

‘the Fixed Investment Loan from Westpac is suitable for your investment property’

‘obtain a loan for your investment property. Suitable lenders include ANZ, CBA, and NAB who are all currently offering fixed interest home loans’

Increase the limit of an existing credit contract

Assume the continuation of an existing credit contract

Suggest that the consumer increase loans

‘you should consider repaying your home mortgage and increasing the value of your investment

Suggest to increase the limit in a particular credit product

‘you should increase the amount of your Fixed Investment Loan with ANZ’

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with tax deductable interest repayments and reduce loans with non-deductable interest repayments

property mortgage’

‘you should consolidate all your debts into your existing Westpac personal loan’

Remain in a credit product

Assume the continuation of an existing credit product (e.g. preparation of financial advice which presupposes continuation of existing home loan)

“you currently have a Fixed Investment Loan with NAB”

Suggest to remain in a credit product

‘you should remain in your current investment loan as it is the best currently available’

‘you should consolidate all your debts into your existing ANZ personal loan’

Activities in the ‘cannot’ column amount to providing credit assistance.

The licensee considers the tipping point when considering whether advice is credit assistance is whether or not the advice is generic advice with regard to strategies.

You can say, for example:

‘“your personal loan interest rate is well above the market rate’;

‘it is desirable that your mortgage has the following features...’;

‘you should repay your Westpac credit card debt as it has the highest interest rate amongst your debts’;

‘you should approach your lender and renegotiate your loan on the basis of hardship’;

‘you should make larger loan repayments’; or

‘you should consolidate your credit card debt into one credit card with a low interest rate’ (not naming products).

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15.6What you can and cannot doThe table (below) summarises the type of dealing services that you can and cannot provide (i.e. what is caught and not caught by the Act).

Category of Dealing

Permitted Dealing

Examples Prohibited Dealing

Examples

Apply for a credit product

You cannot assist consumers to apply for a credit product

No permitted dealing

Assisting to apply for a particular credit product with a particular credit provider

Completing or lodging application forms for a consumer

Increase the limit in a credit product

You cannot assist consumers to increase their limit in a credit product

No permitted dealing

Assisting to increase the limit in a particular credit product

Completing or lodging forms which will increase the limit in a credit product for a consumer

Debt management

Assisting a consumer to repay debt/s

Assisting a consumer to complete a transaction to repay debt

Assisting a consumer to consolidate / negotiate debts

Transferring existing debts into one credit product

Negotiating with a lender on behalf of a consumer on the basis of hardship

Activities in the prohibited column amount to providing credit assistance.

15.7Referring Consumers to Credit ProvidersA referral to another credit provider, or credit service provider, may amount to a credit service. A representative can only make a referral in compliance with 1 of the 5 options below.

15.7.1 Option 1: The basic referral

þ You (the referrer) provide the consumer with the credit licensee’s contact details only.

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ý The referrer cannot:

provide the credit licensee with the consumer’s contact details facilitate contact between the consumer and the credit licensee endorse the provider or its products.

To rely on the basic referral, the following conditions must be satisfied:

1) You inform the consumer that a credit licensee or a credit representative (the provider) is able to provide a particular credit activity or a class of credit activities (e.g. arrange home loans).

2) You give the consumer information about how the consumer may contact the provider.

3) At the same time, you disclose to the consumer any benefits (including commission) that you (or an associate) may receive in respect of the activity, or that is attributable to the activity.

4) The benefits disclosure is in the same form as the information given by you about the provider. For example, if you give the information about the provider in writing, the benefits disclosure will also have to be in writing.

15.7.2 Option 2: The website referral

þ You provide the consumer with the credit licensee’s contact details only. þ You make arrangements for consumer to contact the credit licensee via

a link on your website.

This referral has all the same requirements as Option 1.

However, under this option, not only can you give the consumer information about how the consumer may contact the provider, you can also make arrangements enabling the consumer to contact the provider by means of a link that can be accessed from a website which you or an associate provide.

15.7.3 Option 3: Special referrals (from 1 October 2010)

þ You can provide a credit licensee with the consumer’s contact details.

ý You cannot rely on this option if your principal business is referrals.

! There must be an agreement in place between you and the credit licensee.

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To rely on this option, the following requirements must be satisfied:

1) You must conduct your referral under a written agreement with the credit licensee (or registered person) that explains the conduct in which you can engage (e.g. can provide the credit licensee with consumer details).

2) You give the credit licensee the consumer’s name and contact details within 5 business days after informing the consumer.

3) You must have the consumer’s consent to provide their contact details to the credit licensee (or registered person).

4) You disclose to the consumer any benefits (including commission) that you (or an associate) may receive in respect of the referral, or that is attributable to the referral.

5) You do not conduct a business as part of which you contact people face-to-face from ’non standard business premises’ (e.g. a stall in a shopping centre).

15.7.4 Option 4: Registered Tax Agents This only applies to you if you are a registered tax agent.

Credit services (only) provided by a registered tax agent are exempt credit activities if:

1) you are registered under Part VIIA of the Income Tax Assessment Act 1936

2) you engage in the credit activity in the ordinary course of activities as a tax agent; and

3) you are not providing a certificate or assessment relating to whether a consumer will be able to meet financial obligations under a credit contract or consumer lease.

Tax agents are not exempt where they are in some way expressing an opinion as to the capacity of the consumer to meet financial obligations under a credit contract or consumer lease. However, they are exempt where, for example, they provide a statement of financial position to assist a consumer in applying for finance, but express no view as to whether the consumer can meet the repayments.

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The Advice Process

16 The first client contactWhen you first meet with your client, you need to do a number of things.

16.1Provide and explain your Financial Services Guide (FSG)

Your FSG sets out: what sort of services you can offer;

what it might cost the client directly;

what other payments or benefits you and others might receive as a consequence of the services which you provide to that or any client;

how the personal information is treated;

how complaints are handled; andwho is responsible for what you do or say.

Before you provide any advice or dealing services to a retail client (e.g. at your first meeting), they must have received your FSG. Some advisers mail it out in advance. If you mail it out in advance, make sure the client does receive it and that you make a note on the file.

The only exception is where you really have not had a reasonable opportunity to provide it to them, or you are working in a time critical situation - in which case you need to tell them in detail how you are remunerated and of any benefits or associations you may have that could influence your advice – and you then provide the FSG within 5 days.

You need evidence on the client’s file that the FSG was provided before the financial service was provided. This might be a copy of a cover letter sent to the client, or an email showing the attached FSG. Each time an FSG is provided, the evidence must show the:

date the FSG was provided; and

FSG version which was provided.

Compliance Tip: Your FSG must include information about remuneration, commissions and any other benefits you receive. Getting this right can be difficult – you might need some outside help.

You should not assume that a standard acknowledgement in a list of matters that the client signs off will protect you. A client may later allege that they just signed off to this, and had no idea what the FSG looked like, nor what he or she was signing.

Explain the FSG to the client. Put a copy of it on their file – you need to make sure it stays on the file for seven years.

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You should pay particular attention to how your fees are disclosed. If there is a complaint about your fees and services the client will generally seek to rely upon the FSG. It’s important that the information provided is transparent as to what commissions or other indirect benefits you may receive.

If you change your billing structure you need to make sure that the FSG accurately and comprehensively sets out an indication of the likely cost that a person would incur for each of the services which you offer.

Compliance Tip: You don’t have to give another FSG to an existing client if your FSG has not changed.

16.2Updating your FSG

You should periodically review the contents of your FSG and make sure that it is up to date:

If you change the way you bill clients you must ensure that a client cannot misunderstand or misinterpret the total amount that you will receive as a result of the service provided, and where it will be paid from.

16.3The client engagement letter/agreementYou must define the scope of your engagement with the client and document it. The best way to do this is to give the client a formal engagement letter, and then have them sign it.

Examples of engagement letters – refer to the CPA Australia website and the Institute website. (Note: You are also required to comply with APES 305 – Terms of Engagement.) The engagement letter will make sure you and your client are clear about what is to be undertaken, and any limitations on what you can do, or will do, for that client.

Your Terms of Engagement should clearly set out:

1. The scope of your service – will you provide full financial planning advice, or just advice on certain aspects of your client’s circumstances? Will it be ongoing, or once-off? If you are being engaged to provide services for a period of more than 12 months, your engagement is an ongoing fee arrangement. This will require the provision of a Fee Disclosure Statement on or shortly after the anniversary date of the engagement.

2. Your processes in dealing with the client – explain your service standards, timeframes, how you will get information from them, prepare a plan, give advice, allow for the client to review the advice and seek further information.

3. How and when the client must pay for your services – explain your processes in verifying the client’s information, or seeking further details on behalf of the client (and the authority which you will require in order for this to be undertaken).

4. The client’s expectations and rights – set them out (e.g. frequency of contact), including any conflicts or limitations on those rights.

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http://www.charteredaccountants.com.au/Industry-Topics/Practice-management/Publications-and-tools/Publications-and-tools/Practice-management-everyday-tools.aspx

5. How the engagement can be terminated.

6. Informed consent – the engagement should only proceed once this is obtained from the client.

16.4The fact finding processThe fact finding process applies to your first client contact and continues to apply for as long as you provide financial services to your client. It is key ’paper trail’ documentation which, if completed properly, can protect you from legal action by your client and enforcement action by the regulator.

The fact finding information must ‘tell the story’ about the client, and should stand alone from any advice documents. This is a vital risk management strategy when operating a financial planning business. You must keep the information on the file of any client.

Compliance Tip: If your client has a low level of financial literacy think about providing them with copies of information from ASIC. You can print them off yourself by visiting www.moneysmart.gov.au – the information is clear and easy to understand.

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16.4.1 What your fact finding documentation must ’show’Treat the following requirements as a checklist - it will help protect you against client complaints:

Show the level of the client’s financial literacy. This is not necessarily in direct proportion to the educational level, or to the value of assets, held by the client. Some clients may now have sizeable assets only because of a recent inheritance, or a superannuation payment, and if it were not for these events, might otherwise have not been very well off.

The standard of enquiry which needs to be undertaken by you relates to: the age;

the educational level

the degree of sophistication of dealing with service providers that the person has;

any disabilities which the person has;

whether the person is Australian, or from another country (and used to different investment markets or dealings with professionals, or ability to understand the English language is not high)

the degree to which the person is willing to place too much trust in a professional person; and

the person’s level of understanding of investment markets and investment terms.

Show the client’s objectives, needs and priorities that are relevant to the subject matter of the advice and the scope you have set out in your Terms of Engagement.

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If a complaint is made to the Financial Ombudsman Service (FOS), it will be very hard to prove in your favour, unless you have some documentary evidence, even if in the form of your own notes, that you made a proper assessment of the clients and any special disabilities they may have.

16.5Risk ProfilingDetermining a client’s risk profile is simply the process of understanding and articulating a client’s emotional (rather than their rational) feelings about possible scenarios, and therefore how much a client is prepared to put at risk for the chance of obtaining a satisfactory return.

Risk profiling helps you fully understand what is relevant about the particular client. You need to understand their tolerance for risk if you will be making asset allocation recommendations (of course, you cannot refer to specific products under your licence).

Many cases which have been referred to the external complaints service have involved an allegation that the investments placed, or advice given was inappropriate in terms of the clients risk profile.

Write down your discussion about risk, and how you have educated each client (if a husband and wife, treat them individually) as to the risks of investing. Show each client’s risk profile and how you and the client arrived at it.

A documented process is just part of the process of the understanding of a client’s tolerance for risk. Your own intuitive powers are equally important in understanding and interpreting what your clients are actually saying to you, and how that actually impacts upon the risk tolerance or risk aversion. You should understand:

a client’s risk attitude (a psychological attribute); and

a client’s risk capacity (a financial attribute).

Use a risk profiling tool with new clients and put the outcome on the file. For couple’s make sure they each do a test.

Short questionnaires are dangerous. The reliability of the answers given will be low, and this can cause a client’s risk tolerance to be inaccurately classified. Short questions can only provide ’ballpark’ answers.

The more risk that is to be adopted by the client, the more evidence should be kept on file to demonstrate that it was appropriate advice at the time for the client.

Include notes about any variations between the client’s risk profile assessment and your own intuitive diagnosis about a client’s tolerance for risk.

16.6Fact Finding after the first contact

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After the first meeting, you need to keep your information up to date. This will affect which advice documents you use for ongoing advice, and will form much of the basis of your ongoing advice.

Keep your fact finding information in such a way that it is updated over time. In the case of ongoing clients, there should be some formal process to record, in one place, any changes which have occurred in the client’s personal, financial and lifestyle details. Try to update your Fact Finder at least every 2-3 years.

Update their risk profile. You should reassess the client’s risk profile in every 3 to 5 year period or whenever you make recommendations or their personal situation has changed. For example if a client has recently got married or changed jobs their risk tolerance may have changed.

A client’s tolerance to risk will alter according to: the client developing an understanding of investments and investment

markets, and acquiring a confidence in the processes

the increasing proximity to retirement of the client; and

a change in the markets (e.g. share market downturn).

It is important that your file demonstrates that these changes have been monitored and noted.

If ASIC reviews your files they will look at the risk profiles and fact finding information to ensure it is up to date.

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17 Giving Advice

17.1The advice ‘cheat sheet’

The following diagram sets out the documents that must be provided to a client during the advice process.

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If the client wants to implement your advice before you get the SoA to them, give them the SoA within five business days of implementing the advice

Yes

NoYes

If you can’t give the FSG before you start, give it within five business days of communicating with the client. If it’s a new client, before you start, explain to them how you’re paid

You communicate verbally or in writing with a retail client

Have they got the most up-to-date FSG?

Yes

No

Are you giving advice?

No

Make a file note on the spot or

soon afterwards

Have you given the client an SoA in the

past?

Yes No

Has there been a significant

change in the client’s

circumstances or the basis of

your advice?

Yes No

Give the client an FSG before you start

Give the client an SOA as soon as

practicable

Make a record of advice on the spot or

soon afterwards

Give the client an SoA as soon as is

practicable

Is your advice to set up an SMSF?

Yes

Where the SMSF has a PDS, give it to the client before they

set up the product

Is the client instructing you to help them buy a product?

Yes

No

No

No further action necessary

Implement advice as agreed with client

The FSG, SOA or PDS may be given to the client by email, fax, mail, hand, CD, or any other method as agreed between you and the client, which allows you to be sure the client has received it.

The only product you can help a client

acquire is an SMSF

Is it personal advice?

Give a general advice warning

17.2 Giving a Product Disclosure Statement (PDS)

You must provide a PDS to the client before or at the time of recommending a product. This will typically only be an applicable rule where you are recommending an SMSF or a client’s existing non-SMSF superannuation product.

You must be able to show on the file that you have provided these PDSs.

17.3 When are you not giving advice?‘Financial Product Advice’ is a recommendation or statement of opinion that is intended (or could reasonably be regarded as being intended) to influence a person to make a decision about a financial product or class of financial products. It can be verbal or in writing.

To determine whether you are giving ‘advice’ ask yourself:

‘what actually is the client asking of me, or expecting me to do?’

Is the client merely asking for administrative or factual information?

Factual Information (or “no advice”) is when: you make no qualitative judgement, and the information which is given

is that which can be objectively tested

you don’t provide your opinion about a particular financial product (eg. BHP shares) or class of products (eg. mining shares)

you don’t make a recommendation about a particular financial product or class of products; or

you don’t ‘add value to the facts’ when talking about financial products.

ASIC’s RG 175: Financial product advisers – Conduct and disclosure and RG 224: Giving information, general advice and scaled advice both provide a number of examples. We suggest you refer back to the guides for further guidance on this area.

If it is only ‘administrative’ or ’factual’ information which is being given, and there is no expression of opinion or recommendation by you, then it is not advice.

17.4 Non-advisory staffYou need a documented process (which will include training) to ensure that non-advisory staff do not provide financial product advice.

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17.5 When are you giving only ‘general’ advice?

General advice is financial product advice that doesn’t take into account any of the client’s:

needs; or

objectives; or

financial situation.

You need to ask yourself three questions to determine whether you’re providing general advice or not:

1. ’In making my recommendation/opinion about this financial product(s), am I taking into account any of the person’s needs, objectives or financial situation?’ Yes or No?

2. ‘Will the person assume or think that I have in fact taken into account any of their needs, objectives, or financial situation?’ Yes or No?

3. Has the possession of the information about your client influenced your statement? Yes or No?

If you answer ‘no’ to all three, then you have probably provided general advice only. If you answer ‘yes’ to even one of the questions, then you have provided personal advice.

Compliance Tip: Remember that if you have an existing relationship with the client then you need to be very careful to make sure that you are not giving them personal advice! They might assume that because they have dealt with you before that you are giving them personal advice.

If you are only giving general advice then you do not have to give an SOA, SOAA or ROA. But, you do have to give a general advice warning (GAW). The warning can be incorporated into the substance of the general advice.

Standard words for a verbal and written warning are at “Working Document 23 – Warnings”.

General information can be given to a client even if you have information about the client’s personal circumstances. The test for whether financial product advice is ‘personal’ or general is not whether you possess information about the client’s personal circumstances but whether you have taken it into account. You will not necessarily take the information into account merely because you have the information.

Compliance Tip: If ASIC notes you are engaging in many GAW situations they will see that as a flag to have a close look at your files. Using the GAW to get around compliance requirements will backfire on you!

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17.6 What types of clients do not have to receive an SOA or ROA?

Regardless of whether or not a client is retail or wholesale, you must provide them with an FSG. This is part of our policy to manage conflicts of interests. We manage some conflicts by disclosing to clients how we are paid. You must also document your advice in writing.

For other purposes, you can determine whether your clients are retail or wholesale using the following guidelines. You are not required by law to give an advice document (SOA or ROA) to a ‘Wholesale client’.

17.7 When giving personal advice to a retail clientWhen you give personal advice to a retail client for the first time, you must give them an SOA at or shortly after you have given the advice.

Keep all advice documents on your client file for at least 7 years.

17.8 The five pillars of an SOARegardless of the scope of your advice, there are five pillars which every SOA is required by law to include.

17.8.1 ScopeYour SOA must clearly define the matter/s you have been asked to advise on. Without a clear scope, you open yourself up to any number of potential risks, ranging from claims by clients or investigation and punishment by ASIC.

Your scope must include a clear statement of what you are being asked to do – now and ongoing, including any restrictions, based on your conversations with the client.

Example of good scope: “David, you have asked me to review your current superannuation arrangements and to advise you on a strategy to enhance your retirement benefits. You have declined my recommendation to discuss your life insurance needs because you believe that you have sufficient cover already.”

Your scope must not include:a template, generic statement which does not reflect your actual discussions with the client. (Tip: don’t mix your recommendations into the scope!)

Example of bad scope: “David, you have asked me to roll over all your industry fund account balances into Navigator which will provide you with simplified reporting.”

Compliance Tip: You should ensure the scope is consistent with the terms of engagement and the client’s objectives.

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17.8.2 Advice related dutiesThe second pillar is that you must comply with the duties to:

(a) act in the best interests of your client(b) give appropriate advice; and (c) prioritised the client’s interests over your own in the event of any conflict between them.

Although there is some overlap between these duties, they are each independent duties. It should be evident from reading the SoA that you have complied with these duties.

*What is ‘acting in the best interests of the client’?You will be deemed to have acted in the best interests of your client if you can satisfy the ’safe harbour’ test. This requires you to have done each of the following:

(a) identified the objectives, financial situation and needs of the client from the instructions received from them

(b) identified:(i) The matters that are the subject of the advice sought by the client

(which may be explicit or implicit); and(ii) The objectives, financial situation and needs of the client relevant to

the advice on those matters(c) made reasonable inquiries to obtain complete and accurate information

relevant to the advice on those matters(d) considered whether you have the expertise to provide the advice and, if

not, decline to do so(e) if it is reasonable to consider recommending a financial product:

(i) conducted a reasonable investigation into the financial products that might achieve the relevant objectives and needs;

(ii) assessed the information gathered in that investigation;(f) based all judgements in advising the client on the client’s relevant

circumstances; and(g) taken any other step that, at the time the advice is provided, would

reasonably be regarded as in the client’s best interests.

What is “appropriate”?ASIC says that, in its view, ‘appropriate’ advice, is advice which, if acted upon by the client, would be reasonably likely to satisfy critical aspects of the client’s relevant circumstances” (RG 175.89)

The ’safe harbour’ for meeting the best interests duty is taken from section 961B(2) of the Corporations Act. To make sure you have acted in the clients best interests , ask yourself the following questions:

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Question Yes/No

1. Have I identified the client’s objectives, financial situation and needs from what they have told me?

2. Have I identified and clearly articulated the matter/s that they want my advice on?

3. Have I identified their objectives relevant to those matters? (E.g. to give their children a private school education).

4. Have I identified the client’s needs? (E.g. a calculation to determine the appropriate level of life insurance cover.)

5. Have reasonable enquiries been conducted to ensure that the information about the client’s financial situation, objectives and needs relevant to the matters I am advising on is up to date and complete?

6. Have enquiries been made of the client’s considerations into environmental, social or ethical matters?

7. Is the detail and complexity of the inquiries, consideration and advice proportionate to the complexity of the client’s purpose?

8. Is the detail and complexity of the inquiries, consideration and advice proportionate to the potential negative impact on the client if inappropriate advice is acted upon? (More extensive client inquiries and consideration of the subject will be necessary where the potential negative impact is likely to be relatively serious.)

9. Has the client’s financial literacy been taken into account?

10. Is there a generic description of the range of financial products, classes of financial products or strategies considered and investigated in the SOA or somewhere in the file?

11. Have you considered whether you have the expertise to provide the advice sought?

12. Is a statement of the advice itself is included?

13. Is there an explanation of the reasons why advice is appropriate to the client, including advantages and disadvantages if the advice is acted upon?

14. Are the main risks of the advice not satisfying critical aspects of the client’s relevant circumstances set out?

15. If your advice is based on information about the client’s relevant circumstances that you know is incomplete or inaccurate, or you are unsure, have you included

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Question Yes/No

the required warning? [Note: the warning is in “Working Document 23 – Warnings”]

16. If acted upon, is the advice reasonably likely to satisfy critical aspects of the client’s relevant personal circumstances? (E.g. the client’s need for regular income)?

17. Have alternative strategies been considered particularly where the advice is complex or the potential impact of an adverse outcome of inappropriate advice is significant to the client?

18. Have reasonable steps been taken to ensure that any external research relied upon is accurate, complete, reliable and up-to-date?

19. Have you considered yourself whether the product will achieve the client’s objectives and meet their needs?

20. Is the advice provided to the client appropriate (suitable) for the client’s objectives, financial situation and needs?

21. If applicable, does the recommended replacement product have greater overall benefits for the client than the old product? If not, is there justification for the recommendation (e.g. lower cost)?

22. Is there anything, other than what is in the best interests of the client that is influencing the advice you are giving to the client.

You (or an auditor) should be able to answer the above questions by looking at the complete client file.

17.8.3 Replacing ProductsThe third pillar is that you must do certain things if you are replacing a product. Replacing a product includes if there is a disposal of or reduction of a level of interest in a financial product and instead an acquisition of or increase of a level of interest in another financial product.

To make sure you do the right things, ask yourself the following questions:

Questions if replacing a product Yes/No

1. Have you described any charges the client may incur in relation to the disposal or reduction, stated as amounts in dollars*?

a. If no, and where you do not know the amount, and cannot reasonably find it, have you included a statement that there may be charges but you do not know what they are?

2. Have you described any charges in relation to acquisition or increase, stated as amounts in dollars*?

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Questions if replacing a product Yes/No

a. If no, and where you do not know the amount and cannot reasonably find it, have you included a statement that there may be charges but you do not know what they are?

3. Have you described any benefits, pecuniary or otherwise, that the client may lose as result of taking action, stated as amounts in dollars*?

a. If no, have you included a statement that there may be lost benefits but you do not know what they are?

4. Have you described any other significant consequences of action, stated as amounts in dollars?

a. If no, have you included a statement that there may be other consequences but you do not know what they are?

*Dollar DisclosureWhere you can’t disclose an amount in dollars because not all factors are known, and cannot reasonably be discovered by you, you may disclose as a percentage instead. If it’s not possible to disclose the amount as a percentage, explain the method of

calculation. In both cases, give worked dollar examples.

Where it is a non-monetary benefit or interest, disclose: the nature and extent of the benefit/interest;

the circumstances in which the benefit/interest will arise or be provided; and

the estimated value of the benefit/interest, where a retail client would reasonably require such an estimated value for the purposes of deciding whether to act on the advice provided.

Rebalancing will trigger replacement of product requirements if you advise or deal in relation to the rebalance. It will not trigger the requirements if your client’s money is invested in a fund which does the rebalancing.

Example where replacement of product requirements apply: You recommend that your client, an SMSF trustee, rebalance his fund by using surplus cash reserves to purchase more shares.

Example where replacement of product requirements do not apply: You have previously recommend that your client maintain a “balanced” portfolio, and all of her funds are invested in a managed fund, which automatically rebalances the fund quarterly according to that portfolio model.

17.8.4 Disclosure of BenefitsThe fourth pillar is that you must disclose benefits. This includes monetary and non-monetary benefits paid to you, your business, referrers, the licensee, and any related companies or associates!

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To make sure you do the right thing, ask yourself the following questions:

Question Yes/No

4. Have you disclosed remuneration/benefits to be received by you that might reasonably be expected to be capable of influencing you or your business in providing the advice – stated as amounts in dollars?*

5. Have you disclosed remuneration/benefits to be received by your employer or your business (e.g. the corporate authorised representative) that might reasonably be expected to be capable of influencing you in providing the advice – stated as amounts in dollars?*

6. Have you disclosed remuneration/benefits to be received by us (the licensee) that might reasonably be expected to be capable of influencing you in providing the advice – stated as amounts in dollars?*

7. Have you disclosed remuneration/benefits to be received by a director or employee of us (the licensee) that might reasonably be expected to be capable of influencing you or your business in providing the advice – stated as amounts in dollars?*

8. Have you disclosed remuneration/benefits to be received by an associate** that might reasonably be expected to be capable of influencing you or your business or us in providing the advice – stated as amounts in dollars?*

9. Have you disclosed other interests, whether pecuniary or not and whether direct or indirect, you and your business, us (the licensee) or an associate of any of those that might reasonably be expected to be capable of influencing you or your business in providing the advice – stated as amounts in dollars?*

10. Have you disclosed information about remuneration (including commission) and other benefits that a person receives for referring a client to you, your business or us?

In addition to the bare legal requirement, you need to look at your explanation of the fees and commissions disclosure from the perspective of the client. You are familiar with pricing structures and the role of commissions, but clients are not.

Make sure for disclosure in the SoA is as simple as possible – this will protect you in the long run.

It is very easy for clients to misunderstand, or misinterpret, what your services actually cost and how you are paid.

17.8.5 Clear, Concise and Effective

The fifth pillar of a statement of advice is that it must be clear, concise and effective. It must be easy for the client to understand. ASIC has provided examples of SOAs which are less than 20 pages long.

ASIC’s RG 90: Example Statement of Advice (SOA) for a limited financial advice scenario for a new client is a great resource.

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However, it is an example prepared for a full AFSL holder, not a limited AFS licence holder.

Don’t include complex tables or educational material in your SOA. Focus on the five pillars! If you feel you really need to include some material like this, attach it as an appendix. Do not attach any of these five pillars as an appendix!

Do include ranges, rates, comparisons, simple tables and formulas in order to ensure that information is presented in a clear, concise and effective manner.

17.9 Other requirements for a SOA

There are other requirements for an SOA. We have not included them as pillars, even though they are legal obligations. They include:

Front Page requirements

Does the front page include? Yes/No1. Is the title ’Statement of Advice’ on the cover or near front of SOA?

2. Are the name and contact details of you and your business included?

3. Is the licensee’s name and AFSL number included?

You must also include information about other associations and relationships:

Yes/NoDisclose any associations or relationships between you, your business, us, (the authorising licensee) or any associate and any financial product issuers that might reasonably be expected to be capable of influencing you and your business in providing the advice.

Compliance Tip: If ASIC picked up your SOA would they be able to say ’Yes’ to the following three questions:

1. Has the adviser made reasonable inquiries about the client’s relevant personal circumstances? Yes or No

2. Has the adviser considered and investigated the products they are recommending? Yes or No

3. Is the advice in the Best Interests of the client? Yes or No

4. Has the adviser given priority to the interests of the client in circumstances where there was a conflict in the interests of the adviser or licensee and the client?

If you can put your hand on your heart and answer those three questions with a ‘Yes’ then you have probably met the requirements.

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17.10 Full advice with limited scope or incomplete information

17.10.1 Full advice with limited scopeThere is no such thing as limited advice. Your client will always expect full advice – often with a limited scope. As a limited AFS licensee, the scope of your advice will always be limited to, at a minimum, your licence authorisations.

You may decide to give full advice with a limited scope because the client specifies that they only want to receive advice on a particular strategy, or advice on particular classes of products, or on a limited subject. In such cases, it is particularly important to clearly set out the precise limits of the task the client requires of you.

17.10.2 What if the client does not give you the full story? It may be the case that:

the client will not provide the information which you will need; or

the client indicates that the information which has been given to you is only an estimate, and so objectively it should be treated as potentially inaccurate information; or

the client can only give you incomplete information at the time that the advice is required.

You still have to give that client a Statement of Advice but it must spell out at its beginning that the client has provided limitations on the advice that you can give, because you do not have the full picture.

Your SOA must include the warning at its beginning.

17.11 Record of Advice (ROA) – Further AdviceYou don’t need to provide a client with a SOA when further advice is given to a client if:

the client has previously received an SOA; and

there are no ‘significant changes’ in either of the client’s personal circumstances or the basis of the advice provided in the initial Statement of Advice.

Examples of where there are no ’significant changes’ may include the following.

Increase or decrease in contribution to existing product e.g. making a contribution into an SMSF

Withdrawing cash from an SMSF to cover short term needs.

You just need to keep a record of that advice, and be able to provide a copy to the client when requested.

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There are only a limited number of situations in which a ROA can be given. The longer the gap since the original SOA or was given the greater the likelihood that the client’s situation will have changed. If the client’s situation has changed you can’t use a ROA.

You must be careful if the original SOA contained a limited scope or you received only limited information about the client. In these circumstances, the scope of the later/further advice may be different or the client’s circumstances will have changed, or you may simply now have more information about their circumstances.

If you are in any doubt as to whether the changes are significant or not, you should do another SOA.

The notes which you keep in the ROA should be as comprehensive as possible, if you are to provide yourself with the best protection.

17.12 Record of Advice – ‘hold’ / ‘no recommendation’ adviceIf:

1. you provide advice, but make no recommendation to acquire or dispose of a particular financial product class, or no recommendation to modify the client’s investment strategy or contribution levels; and

2. you, the licensee, or a director or employee of the licensee don’t receive directly any remuneration from the advice; then

you don’t need to provide the client with an SOA. You just need to keep a copy of the ROA on the file.

17.13 ‘No advice’ or Execution only instructionsIf a client requests that you conduct a transaction (i.e. deal in an SMSF) and you have not provided any recommendation about that transaction you don’t have to do a SOA.

You must ensure that your client file contains evidence that you did not give any advice in relation to the particular transaction. This can be done through a short email or note to the client, or by obtaining written instructions from the client that show that the client is not requesting advice.

Be careful where the client is proposing to invest in something that you think would be risky for them.

Even though the client has not asked you for advice, you need to let them know the risk that they are taking on in this particular transaction. It could be alleged that you had a general duty to point out the risks to a client and not to remain silent on the issue.

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17.14 When it is not enough to simply provide a product brochure.

You must know and understand any product or class of product that you think is appropriate to recommend.

When assessing the appropriateness of any product or class of product, you should consider such matters as the inherent risks, including the nature of the underlying investments and assets and any other factors. The investigation undertaken by an adviser should include two aspects:

due diligence; and

product research.

The product research aspect must involve a comparative analysis of the relevant product with similar products.

17.15 What you can give electronicallyYou can provide advice in either printed or electronic form. If you provide the document electronically, it must be provided in a tamper proof document, such as a PDF. You must keep a record of having provided it, and some record that the client did receive it.

17.16 Keeping a paper trailGood file notes are a vital part of your internal process of managing risk – both risk of a complaint, and risk of action from ASIC.

Example: ASIC ordered a Melbourne adviser to undergo 4 compliance audits over the ensuing 18 months after finding that the adviser kept “unreliable client records”. ASIC has also been known to ban advisers in circumstances where an adviser had failed to keep proper records of client communications.

The file notes which you keep should be filed in chronological order.

The file notes and the file generally, should tell the story about the client.

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Example scenario: You are in the witness box, and counsel for the plaintiff, with a degree of intimidation, says to you:

“My client has no recollection whatsoever of you having ever mentioned [your fees/ the commissions which you were to receive/ the risks in the investments recommended], nor of you providing him with a brochure or prospectus for the investment, but you would have us believe that you did in fact provide this information to my client! “

Won’t you be grateful then that you will be in a position to respond:

“I’m glad that you asked me about that. In our firm we have a standard process which we apply in the case of all of our clients. Here is a copy of our checklist for your client which indicates the dates of each action. Furthermore, I can provide copies of similar checklists for all of our clients. We always provide the required disclosures and keep a record of it, for our benefit, and for the benefit of our clients.”

Ideally, the early production of research will do much to ensure that such complaints never reach court!

17.17 What your file should containA client file checklist is included as Working Document 18.

17.18 Conflicts of interestA conflict of interest refers to circumstances where some or all of the interests of clients to whom a representative provides financial services are inconsistent with, or diverge from, some or all of the interests of the licensee or its representatives. These include actual, apparent or potential conflicts of interest.

17.18.1 Rule 1: be clear on fees

Identify the cost of financial planning advice and separate it from the total fees paid for ongoing advice.

Disclose the ongoing advice costs on a regular basis.

This means that the payments by a product provider must be disclosed as commission, and not as an advice fee. If the commission is then used to offset against your advice fee, then you should explain this.

When explaining fees you should carefully set out and distinguish between:

the actual cost of your services, and then

how that cost is to be paid.

Ensure the client understands how the fees they incur are being paid, and what the effective cost is, both in dollar and percentage terms.

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17.18.2 Rule 2: Appropriate productsChoose appropriate products, and don’t be influenced by incentives or other benefits to you, us or your business.

17.18.3 Rule 3: Conflicted remuneration If you know (or reasonably ought to know) that there is a conflict between the client’s interest and the adviser’s or licensee’s (or an associate’s) interests, then you must give priority to the client’s interests when giving advice.

This includes fee arrangements with the licensee which favours one solution over another.

17.19 How do we manage conflicts of interest?Refer to Procedure 14 above.

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Working Document 1 - Compliance Diary [Please refer to 1.6.1 of the Procedures Manual.]

Requirement – Annually Due date(s) Completion date

1. Financial AuditOrganise financial compliance audit (and submit ASIC forms FS 70 and a Compliance Certificate). Your profit and loss statement and balance sheet and auditor's report and forms must be submitted to ASIC no later than: 2 months (for a non-body corporate licensee); 3 months (for a body corporate that is a disclosing

entity or registered scheme); 4 months (for a body corporate that is not a

disclosing entity or registered scheme);after the end of your financial year.

2. TrainingReview annual training plans and role descriptions for all representatives (this includes authorised representatives).Note: the review is probably done at each representatives’ annual appraisal.

Ensure that all representatives advising retail clients (delete if no retail clients) have ASIC-approved RG 146 qualifications and skills relevant to their financial product advice.

Review training procedure.

Update Responsible Manager development plan.

3. Compensation ArrangementsRenew PI insurance. Ensure the PI is still appropriate, given any new identified risks or business restructures. Ensure documented reasons as to adequacy of PI cover levels are up-to-date.

4. Ensure PI insurance will meet requirements of Table 4 in ASIC RG 126.

Tip: Your PI broker can help with this.

Two months prior to renewal date

5. Dispute ResolutionRenew membership of external dispute resolution scheme(s) (if applicable).

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Year beginning: / /


Review dispute resolution procedures, including the Complaints Register. Spot test representatives to determine if they demonstrate an understanding of the dispute resolution process.

6. ComplianceOrganise licensee compliance review

Review compliance arrangements and organisational chart.

7. Adequacy of resourcesReview IT and HR procedures. They should ensure adequate resources are devoted to relevant areas. The provision of our financial services cannot be affected adversely by a lack of resources. Is this occurring?

8. Promotional materialReview promotional material procedures. All external documents must be subject to a sign-off procedure.

9. Responsible ManagersReview responsible manager procedures.

Review key person procedures. Is the succession plan in place up-to-date, in the event that a Key Person is removed?

10. Risk ManagementReview risk management procedures.

11. Conflicts of InterestReview conflicts of interest procedure.

12. OutsourcingReview outsourcing arrangements.

Review whether external service providers are meeting their KPI’s.

13. RepresentativesConduct external adviser reviews.

Ensure that representative procedures for appointment and monitoring are being followed.

If any representatives have been banned or disqualified, notify current or former clients of the representative.

14. DisclosureEnsure all versions of FSGs, PDSs and SoAs (delete inapplicable) are kept for 7 years (electronically or hard copy).

15. Anti-Money LaunderingEnsure that all AML risks, including any AML customer

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ID procedures, are still up to date.

Ensure all staff have had refresher training on AML.

Requirement – Quarterly (every 3 months) Due date(s) Completion date

1.

Financial requirementsMaintain Cash flow projections and update relevant contingencies (ensure at least 3 months are projected at all times).

5.Ensure you are able to pay debts as and when they become due and payable and ensure total assets exceed liabilities at all times.

9.Ensure that all other RG 166 requirements are met (you should develop a financial checklist with your accountants).

13.

DisclosureUse the checklist provided in the Procedures Manual to review randomly selected files.

17.

AuthorisationsHas the business model changed? Ensure that the activities the business is conducting or proposing to conduct in the future all fall within existing licensee authorisations:[insert licensee authorisations]

21. Other procedures manual updatesUpdate risk register.

25. Update conflicts register.

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Working Document 2 – Compliance Committee Charter

[Please refer to 1.7.1 of the Procedures Manual.]

## Compliance Committee Charter

Membership1. The committee shall comprise a minimum of one of ##’s executive team (the ##

executive member) plus any other number of ## staff (## staff member) plus an external chairperson.

2. It is preferable that the external chairperson who is an independent lawyer with practical financial services regulatory experience.

3. A quorum for any meeting shall be at least two members of the committee.

Objectives

4. To oversee ##’s Australian activities so far as is relevant in assessing them for compliance with the financial services laws as defined in the Corporations Act 2001 (the Act).

5. To identify, address and follow up on compliance-related issues facing ## on a day to day basis.

6. To identify and address related commercial legal matters, if deemed relevant by the ## executive member.

Methodology

7. Meetings will be held quarterly, or sooner if the ## executive member elects. They may be delayed or skipped upon election of the ## executive member or if quorum is not achieved.

8. Minutes of meetings will be prepared by a person nominated by the ## executive member.

9. Meeting agendas will be set out according to the following template. Many of the standing agenda items are benchmarked against ##’s obligations as an Australian Financial Services Licensee (licensee), as set out in Section 912A, 912B and 912D of the Act:

Compliance Committee Meeting Agenda

Licensee: ##Date:Venue:Time:Chairman:Minutes:

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1. Present

2. Last meeting minutes

3. Standing items:

a. Representatives [discussion about whether the licensee has adequate HR resources to carry out and oversee the provision of financial services, including a discussion about appointment and termination of representatives and associated processes]

b. Complaints [discussion about complaints and associated processes, including the complaints register]

c. Breaches [discussion about breaches of the financial services laws and associated processes, including the breach register]

d. Promotional Material [discussion about new promotional material, and associated processes]

e. Outsourcing Arrangements [discussion about outsourced providers whose services are relied upon for the licensee to provide financial services]

f. Training Register [discussion about training and associated processes, including the training register]

g. Monitoring and Supervising Representatives [discussion about monitoring and supervision of representatives and associated processes]

h. IT Resources [discussion about whether the licensee has adequate IT resources to provide the financial services, and associated processes]

i. Financial Resources[discussion about whether the licensee has adequate financial resources to provide the financial services]

j. Conflicts of Interest[discussion about actual, perceived or potential conflicts of interest and related processes, including the conflicts of interest register]

k. Risk Management[discussion about risk management and related processes, including the risk register]

l. Compensation Arrangements

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[discussion about current compensation arrangements (eg. PI insurance)]

m. AML/CTF[discussion about anti-money laundering obligations and related processes]

4. Other business:

a. Regulatory developments[Summary of regulatory developments relevant to the licensee]

b. Other matters

5. Next Meeting:

10. Other agenda items can be submitted by any member of the committee at any time prior to a meeting.

11. This Charter retrospectively applies from the date of the first formal compliance committee, [insert date]

_______________________________[insert name] – ## Executive Member

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Working Document 3 - Incident Register[Please refer to 2.3.6 of the Procedures Manual.]

[you may choose to reproduce this in spread sheet format]

1 2 3 4 5 8 6 6Name & position of Responsible Person

Date of incident

Date incident detected

How incident detected:

Details of incident:[Describe the incident, and refer to where further information can be found.]

Action required and person responsible:[say who will do what to action the incident]

Date incident resolved:

Why incident is not a breach of the financial services laws or AFSL conditions: [eg. may have just be a breach of internal policy.]

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Working Document 4 – Breach Register[Please refer to 2.3.7 of the Procedures Manual.]

Details of each breach should be retained for the statutory period of seven years. See ASIC’s Regulatory Guide 78 Breach reporting by licensees for more explanation and detail on breach reporting. [you may choose to reproduce this in spread sheet format]

1 2 3 4 5 6a 6b 6c 6d 7 8Name & position of Responsible Person

Date of breach (or date on which you are likely to breach)

Date breach detected

How breach detected:

Details of breach:

Frequency of similar previous breaches – the greater the number and frequency of the similar previous breach, the more likely the new breach will be significant, as this indicates a systemic problem.

Impact on ability to provide financial services – this is where a breach reduces the ability or capacity of the licensee to provide the financial services; and

Extent to which breach indicates compliance arrangements inadequate – if the breach reflects broader compliance inadequacies, then it is probably significant; and

Actual/possible financial loss to client/ licensee – any breach that causes actual or potential financial loss to clients is likely to be a significant breach, unless it is an isolated incident concerning a minimal/immaterial amount.

Date ASIC notified (Signif. breach only)

Action required and person responsible

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Explain the compliance arrangements, client complaint, etc

Describe the nature of the breach, the obligation that was breached, client(s) involved, etc.

If deemed to be significant according to 6, you must inform ASIC of the breach within 10 business days of becoming aware of the breach. Use a cover letter and form FS80: http://www.asic.gov.au/asic/asic.nsf/lkuppdf/ASIC+PDFW?opendocument&key=fs80_pdf

Assess the breach for significance, against 6a-d

eg ASIC/clients to be notified, procedures amended, representatives advised, training

Working Document 5 – Engagement checklist for outsourced providers

[Please refer to 3.4 of the Procedures Manual.]

Conduct formal interviews to select a suitable provider.

Have the external services provider sign a conflict of interests declaration. If a conflict of interest is identified, then, after consultation with the [insert committee name or delete] , include the conflict of interest in the conflicts of interest register, and determine a strategy to address the conflict pursuant to the Managing Conflicts of Interest procedure.

Check prospective service providers against selection criteria. The licensee’s selection criteria to assess the suitability of service providers are as follows: fit with the culture of the business; technical expertise and experience to deliver the required standards; [enter criteria]

Carry out initial checks on the provider’s good fame and character by: obtaining at least one reference from a previous client and, if necessary,

talking to the referee; assessing samples of previous work; checking ASIC registers (for any misconduct by directors); requesting police, ITSA, credit and reference checks (as required); checking membership of a professional body or bodies. [add or delete as neccesary]

Have the external service provider enter into a written contract with ## (either by letter or by formal document) which: clearly defines the scope of outsourced functions in the service agreement; covers all possible circumstances that may affect business efficiency; protects confidentiality of licensee and client information; ensures that service standards will not lead to a breach; clarifies the regulatory responsibilities of the provider; includes a termination clause which covers expiration of the term, material

default, disputes, or change in control of key persons etc within the provider’s organisation;

states that in the event that a service provider engages in conduct that ultimately places ## in breach of its licence conditions, ## will take action pursuant to the service agreement, which may include termination of the service provider.

Give an induction session to the service provider to: ensure they truly understand the nature and operation of the business; ensure that they understand how their performance may affect the licensee’s

obligations under the AFS licence; [insert other].

Check that the licensee’s disaster recovery plan and risk management register contemplate what action will be taken if the external services provider ceases providing the services and, if they do not, updated those documents.

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Working Document 6 – Example letter to existing services provider

[Please refer to 3.5.1 of the Procedures Manual.][date]

[title][address]

Dear [insert name]

Re: The provision of services to ##

We confirm that the scope of the services you are providing to us are as follows:[describe]

In the course of those activities, we also confirm that any information that you receive from us, or about our business practices, or our clients, is strictly confidential.

As you know, ## is the holder of an Australian financial services licence, number [insert]. To ensure that we comply with the Corporations Act 2001, the Corporations Regulations 2001 and ASIC’s requirements, we draw your attention to the following issues:

1. You may not advertise or promote any of our products or services without the express written consent of myself or [insert], on behalf of ##.

2. It is reasonably foreseeable that if you cause us to breach our licence conditions, then we might suffer loss. If you cause us to breach our licence conditions and it is not possible for you to rectify the breach within 10 business days, then we may (in addition to any other remedies), seek to terminate the agreement.

3. To help you avoid this situation, we are putting you on notice of our licence authorisations and conditions. A copy of our licence authorisations and conditions is enclosed with this letter.

Please contact us immediately if, at any time, you have any reason to think that you may be causing us to breach our licence conditions – to enable us to address the issue without the need to take further action.

We value our relationship with you, and trust that this letter assists you in understanding our responsibilities as an AFS licensee.

Kind regards,

[name]Director##

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Working Document 7 - Reviewing a service provider procedure [Please refer to 3.6.1 – Reviewing a Service Provider Procedure” in the Procedures Manual.]

[Keep the rating table on the provider’s file:]

Provider Name: Date: / / 20Rate the provider against the following KPIs: Y/N/NA Comments

Responsive to queries Responsive to concerns or breaches Timely of service delivery High quality of services provided Responsive and understanding of

trends and industry developments High level of expertise Competitive pricing Adequately handled any conflict of

interest that may have arisen Satisfactory dispute resolution

procedures Satisfactory disaster recovery Have any breaches of the licensee’s

AFS obligations occurred as a result of the service provider’s performance?

[insert other]Is there a need to carry out checks against the provider’s good fame and character?Action required following review: Comments: Provide a report to senior management on the

quality and efficiency of the service provided [delete if inapplicable].

Direct employees to report to the Compliance Manager any conduct of a service provider which they suspect may risk placing the licensee in breach of its licence conditions or the licensee’s internal compliance procedures.

If the service provider has engaged in conduct that ultimately places the licensee in breach of its licence conditions, the Compliance Manager will take action pursuant to the service agreement, which shall include:

recording the breach (and reporting to ASIC if it is deemed significant) pursuant to Procedure 1 – Notifying ASIC of Breaches and events; and may also include:

Action pursuant to the terms of the service agreement, (which may include termination of the agreement or compensation by the services provider).

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If the service provider breaches the service agreement in any other way, take action pursuant to the service agreement which may include termination of the agreement or compensation or rectification by the service provider.

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Working Document 8 - Promotional Material Checklist

[Please refer to 4.2.1 – Promotional Material Checklist of the procedures manual.]The Compliance Manager must consider specific factors when using specific types of advertising media.

Mass media – whether the advertisement is accurate, balanced and helpful for the audience that is likely to see the advertisement. Advertising must be clearly distinguished from normal program or editorial content.

Audio advertising – warnings, disclaimers and qualifications must be read at a speed that is comprehensible to an average listener.

Film and video – information about risks and warnings should be easily understood by an average viewer on the first viewing of an advertisement and not undermined by distracting sounds or images.

Internet – the overall impression of an internet banner when viewed for the first time should be considered. The Compliance Manager must consider whether the advertising is appropriate if content limitations means that there is insufficient space to provide balanced information. Consumers should be able to keep a record of the advertising, including any warning and disclaimers.

Outdoor advertising – must consider how the outdoor advertising will be viewed when considering whether the overall impression of the advertising is misleading or deceptive (e.g. viewed from a moving vehicle).

Promotional Material ChecklistMaterial checked?

Description of marketing material:

Date prepared:

Prepared by: Date

1. Who is the principal? The representative’s name and logo must not be shown in a way that makes it appear to be the principal. Eg. The words “authorised representative of…” should be included in close proximity to the representative’s name and logo. The overall communication to the reader/target audience should be clear as to who is providing the information and in what capacity (ie. as principal or as authorised representative).

2. General advice. If the material contains general advice, it must contain a warning that: the advice has been prepared without taking into account the

client’s objectives, financial situation or needs before acting on the advice, the client should consider whether it is

appropriate to them, in light of their objectives, financial situation or needs

(If the advice relates to a financial product that has a PDS, such as most SMSFs) the client should obtain and consider the Product Disclosure Statement before making a decision in relation to the product.

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Note: this warning can be in your own words, and in a way which is meaningful to your client/target audience.

E.g. Any advice included in this [eg. document] has been prepared without taking into account your objectives, financial situation or needs. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs. You should look at the [insert name] Product Disclosure Statement before making a decision about the product referred to in this [e.g. document] [Note: delete the last sentence if no PDS is relevant to the general advice]

3. Restricted words. The material must not use the words ’independent’, ’impartial’ or ‘unbiased’ or similar words if a commission or other gifts are received, or there is any other association which might be expected to influence the representative in providing any financial service.

4.5. AFS licence number. The licence number must be included on all

Financial Services Guides and supplementary Financial Services Guides, Product Disclosure Statements and supplementary Product Disclosure Statements, Statements of Advice and periodic statements.

6. ACN. The company’s ACN (or, if the last nine digits of the company’s ABN are the same as the ACN, the company’s ABN) must be on all of its public documents and eligible negotiable instruments. In relation to promotional material, this includes:

official company notices

websites that facilitate transactions

written advertisements making a specific offer which can be accepted (e.g. by completion of an order form attached to the ad); and

business letterhead (including email signatures, but NOT business cards or .with compliments. slips).

Note: an ACN is NOT necessary for ads which only promote the company and its goods or services in general.

7. Impression. The material must not be misleading or deceptive (even unintentionally misleading or deceptive).

8. Returns, benefits and risk. The material gives a balanced message about the returns, benefits and risks of the financial product. Benefits are not given undue prominence compared with risks. Material should not present a one-sided view of a product’s key features to overstate the product’s benefits.

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9. Past Performance. If the material includes past performance data, there are a large number of requirements, and the material should be checked with our lawyers. For example, “Past performance is not a reliable indicator of future performance” is standard wording that should be used. Also, performance figures should not be “cherry picked”.

10. Opinions or projections regarding future matters. Forecasts must based on reasonable assumptions. You need to have a reasonable basis for believing that the information used is accurate and reliable. Forecasts about future performance should also state that the forecasts are not guaranteed to occur.

11. Comparisons between products. Comparisons are fraught and highly litigated. Avoid comparisons if possible. Check with your lawyers if you go ahead with comparisons.

12. Warnings, disclaimers, qualifications and fine print. Should not be inconsistent with other content (e.g. headline claims) and should be sufficiently prominent to convey key information on first viewing.

13. Fees and costs. If fees or costs are included, they should give a realistic impression of the overall level of fees and costs the consumer is likely to pay (including any indirect fees or costs).

14. Use of certain terms and phrases. Terms and phrases should not be used in a way which is not consistent with their ordinary meaning (e.g. free, secure and guaranteed). Industry jargon should be avoided unless you are confident that they will be understood by the audience.

15. Target audience. The audience that might reasonably be able to see the advertising must be able to clearly understand material. Advertising for complex products is only appropriate for a limited group of people and should not be targeted to a wider audience. Advertising should not state or imply that a financial product is appropriate for particular types of consumers unless you have made such an assessment (this assessment should be documented).

16. Consistency with disclosure documents. Descriptions of specific product features must be consistent with any disclosure documents (e.g. PDS or prospectus).

17. Photographs, diagrams, images and examples. Photographs and images must not contradict, detract from or reduce the prominence of any warnings, disclaimers or qualifications. Graphs and charts must not be ambiguous or overly complicated.

18. Nature and scope of advice. Advertising for financial advice services must not create unrealistic expectations about what the service can achieve.

Checked by: Date: Authorised by: Date:

Description of changes/comments:

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Working Document 9 - PI Insurance Checklist [Please refer to 5.6.1 of the Procedures manual.]

Step Considerations/Tasks Minimum Requirements Notes

Step 1: Assess the business

Review the Licensee’s business, including any proposed changes to it. Consider the Licensee’s claim history (if any) as well as its risk management procedures.

Step 2: Assess potential liability

Determine the ‘maximum liability that has, realistically, some potential to arise’in connection with any particular claim against the licensee and all claims in respect of which the licensee could be found to be liable.

Take account and make reasonable estimates of the following factors:

1. liability for claims brought through the Licensee’s External Dispute Resolution Scheme;

2. The maximum exposure to a single client (‘worst loss scenario’ per client);

3. The number of claims that could arise from a single event (potential for multiple claims);

4. The number of claims that might be expected during a policy period;

5. Volume of business;6. Kind(s) of business;7. Number of clients;8. Kind(s) of clients;9. Number of

representatives10. [Other relevant

considerations]Step 3: Approach insurers/brokers

Approach insurers or brokers for a list of key policy features, exclusions and available extensions. Any discussion with insurers and/or brokers should be founded upon full disclosure of conclusions arrived at after completion of steps 1 and 2.

Step 4: Assess amount of cover

Determine whether the amount of cover in any policy is adequate, i.e. whether it

ASIC considers that, to be adequate, PI cover must have an aggregate claim limit of at

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satisfies ASIC’s policy objective. The limit of indemnity should cover a reasonable estimate of retail clients’ potential losses (see step 1). It might be necessary to ask:1. Is the level of indemnity

adequate to cover claims brought both inside and outside an external dispute resolution scheme? (E.g. is it sufficient to cover a claim brought in the courts?) Note that defence costs must be ‘in addition’ to the minimum aggregate claim limit, or the level of cover must be increased to cover such costs.

2. Does the policy cover claims brought by wholesale clients or claims that fall outside the scope of section 912B of the Corporations Act 2001? If so, does the Licensee have sufficient revenue to ensure that these claims do not reduce resources available to satisfy claims brought under section 912B? If not, the Licensee may need to increase the amount of its cover.

3. Does the Licensee carry a higher risk of claims, e.g. due to its dealing of higher-risk products?

4. Are there any manifest weaknesses in the Licensee’s compliance systems (eg a high number of claims or high-risk products/practices) that might necessitate a higher level of cover?

the Licensee must retain records of how it determined what amount was adequate.

least $2 million if the Licensee has a total revenue of $2 million or less. If, however, the Licensee has a total revenue of greater than $2 million, minimum cover should be approximately equal to the Licensee’s actual or expected revenue from retail clients, as indicated by the Licensee’s previous financial year or, if the Licensee believes its revenue is likely to change, based on its own calculations of expected revenue, up to a capped maximum of $20 million.

ASIC has also indicated that it expects all policies will include at least one automatic reinstatement, thus ensuring that they are continually fit to meet the policy objective.

Step 5: Assess Determine whether the scope ASIC has provided a number of

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scope of cover of cover is adequate to satisfy the policy objective. It might be necessary to consider:

1 How many representatives does the Licensee have? Are they geographically dispersed? If so, cover may need to be increased to manage heightened risk.

2 Does the policy cover fraud/dishonesty by the principal and fraud/dishonesty/infidelity by agents (including representatives)?

3 Does the policy cover agreed decisions reached through the external dispute resolution scheme conciliation process?

4 Further, do lower sub-limits apply to EDR scheme awards? If so, how are claims aggregated for the purpose of these limits?

5 ASIC expects the Licensee to set aside adequate resources to cover claims relating to unauthorized products if PI is not available to indemnify this risk.

6 Does the policy have retroactive cover?

minimum requirements that must be met. Accordingly, all policies must cover:

1. Loss or damage suffered by retail clients as a result of breaches by the Licensee of its obligations under chapter 7 of the Corporations Act 2001.

2. Breaches by both the Licensee and its representatives (whether under one policy, or separately under a policy that provides the Licensee with a right to indemnity).Fraud/ dishonesty by the principal defrauding clients (except sole practitioners); and fraud/ dishonesty/infidelity by agents (including representatives).

3. External dispute resolution scheme awards.

4. Legitimate switching cases where a client is being switched from a fund or product that is not on an approved product list to another fund or product that is on an approved product list.

5. All policies must provide retroactive cover from the date of expiration of any previous PI policies.

Step 6: Review policy terms and exclusions

Ascertain whether the policy contains any exclusions that undermine the policy objective.

The policy must not exclude:1. External dispute resolution

scheme awards;2. Loss caused by the

conduct of representatives generally;

3. Fraud and dishonesty by agents and representatives;

4. Claims for misrepresentations about services; and

5. Claims arising from incidents that have been notified to ASIC.

Step 7: Consider financial resources

Ensure that the Licensee has sufficient financial resources

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to cover excesses and gaps in its PI due to exclusions, such that they can confidently be sustained as uninsured losses.

Determine the manner in which the Licensee will cover these claims and maintain records of their assessment (e.g. through capital, cash flow, overdraft or support).

Further, make certain that the Licensee has sufficient resources to cover legal costs.

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Working Document 10 - Complaints Register [Please refer to 6.4.1 of the Procedures manual.]

Client name

Date received

Financial product or

service concerned

Brief details of complaint

Evidence of

breach?EDR scheme

involved?Need to notify PI insurer?

Action taken (including recording

any breaches on breach register)

Date resolved

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Working Document 11 - Appointing representatives checklist [Please refer to 7.3 of the Procedures Manual.]

Note: ASIC and Standards Australia have released a handbook called ‘Reference Checking in the Financial Services Industry (HB 322 – 2007). It is available from www.asic.gov.au.3 It includes excellent templates that can be printed off and given to an applicant representative, including:

Appendix A: Reference Checking Appendix B: A consent form for the applicant to complete, consenting to

background checks being conducted Appendix C: A form to be given to referees asking them relevant questions and

protecting them from any comments they make about the applicant Appendix D: a form to be given to the applicant and referees, which asks further

questions.

When you follow this procedure, you may choose to use some of the ASIC/Standards Australia Templates. We’ve referred to the appendices below, but cannot reproduce them for copyright reasons.

Task Details / supporting documentation Date completed

GeneralReview CVInterviewConduct competency assessment (see Appendix D)Conduct personality testExperienceAssess experience (see Appendix D)Contact referees (see Appendix A, B, C and D)QualificationsAssess qualifications RG 146 compliance (if

providing advice) other qualifications as

appropriateIf providing advice, check RG 146 qualification on ASIC training registerSight copies of qualificationsConduct checksSight proof of identificationCheck ASIC database

3 http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/Reference_checking_in_the_financial_services_industry_HB_322.pdf/$file/Reference_checking_in_the_financial_services_industry_HB_322.pdf

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Obtain bankruptcy check not more than 12 months oldObtain police check not more than 12 months oldObtain credit check not more than 12 months oldAppointmentOpen file for representativeExecute employment or authorised representative agreementProvide authorisation form and keep copy on fileInductionConduct formal trainingProvide copies of or access to relevant office manuals and proceduresAllocate representative to be a mentorInforming ASICIf appointing an authorised representative, inform ASIC within 15 business days of appointmentRecord-keepingObtain and keep representative’s contact detailsObtain and keep authorised representative number (if applicable)Obtain and keep record of all financial services training completed by representative before joining the licensee

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Working Document 12 – Employee of a Licensee[Please refer to 7.3.1 of the Procedures Manual.]

Use this form is you are appointing an employee representative.

1. ## (“the Licensee”) is the holder of Australian financial services licence no. [insertnumber].

2. [insert name] of [insert address] (“the Employee”) is authorised to provide the following financial services on behalf of the Licensee:

A. Provide financial product advice on SMSFs;

B. Provide financial product advice on superannuation products in relation to a person’s existing holding in a superannuation product but only to the extent required for:

1. Making a recommendation that the person establish a SMSF; or2. Providing advice to the person on contributions or pensions under

a superannuation product;

C. Provide class of product advice on the following:

1. Superannuation products;2. Securities;3. Simple managed investment schemes;4. General insurance products;5. Life risk insurance products;6. Basic deposit products; and

D. Arrange to deal in an interest in a SMSF

[Note – the above list cannot be broader than the authorising licensee’s AFSL authorisations. You can restrict the list to make it narrower than the authorising licensees authorisations (eg. Provide general financial product advice on SMSFs only)]

3. The Licensee may revoke this Authorisation at any time by giving the Employee written notice of such revocation.

4. The Employee cannot be authorised to provide a financial service by any other licensee (or authorised representative) without the express written consent of the Licensee.

Signed by [insert name] on behalf of ##.

……………………………..Signature

………………………………….Date

……………………………..Signature of Employee

……………………………..Name of employee

………………………………….Date

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Working Document 13 – Register of Representatives[Please refer to 7.4.11 of the Procedures Manual.]

Full Name Role Type (eg. employee, )

Scope of authority (full licence authority, dealing only, general advice only, none, etc)

Authorised Representative number (N/A for employee representatives & representatives who don’t provide financial services)

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Working Document 14 - Appointing a Responsible Manager Checklist[Please refer to 8.3 of the Procedures Manual.]

The Compliance Manager will ensure that the proposed Responsible Manager:

is someone on whom the licensee depends for organisational expertise;

is someone directly responsible for day-to-day business decisions about the ongoing provision of financial services under the licence, and who has sufficient time available to exercise that responsibility;

meets at least one of the following “knowledge and skill” alternatives, as

extracted from ASIC’s Regulatory Guide 105 Table 1:

Option Knowledge component (qualifications, training etc)

Skills component (experience)

Option 1 (see RG 105.50–RG 105.52)

Meet widely adopted and relevant industry standard or relevant standard set by APRA

3 years relevant experience over past 5 years

Option 2 (see RG 105.53–RG 105.55)

Be individually assessed by an authorised assessor as having relevant knowledge equivalent to a diploma


Option 3 (see RG 105.56–RG 105.60)

Hold a university degree in a relevant discipline and complete a relevant short industry course


Option 4 (see RG 105.61–RG 105.65)

Hold a relevant industry- or product-specific qualification equivalent to a diploma or higher


Option 5 (see RG 105.66) If not relying on Options 1–4, you need to provide a written submission that satisfies us that your responsible manager has appropriate knowledge and skills for their role. Your submission must cover all of the information in RG 105.66

has qualifications that are relevant to the financial services that the Licensee is authorised to provide – determined by:

o assessing against an industry standard*;o obtaining certified copies of qualifications and certificates.

* An industry standard is one that: is endorsed by the appropriate industry body or bodies; has been developed with industry input; addresses the competencies required for that sector, financial service

or product; represents the views of a significant number of industry participants.

has been subject to:o an ASIC database check;

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o a bankruptcy check; o a police check; o a reference check; and o a credit check;

Note: If the Compliance Manager is provided with any of the above checks, they must be less than 12 months old.

has provided two business references that:o are less than 12 months old;o relate to the work that each Responsible Manager has performed in

the industry and the types of financial services ## is authorised to provide;

o confirm that the prospective Responsible Manager is of good fame and character;

o record any prior misconduct.

Note: At least one reference must be from an external source.

has undergone a formal interview process, including a competency assessment (including RG 105 Responsible Manager requirements if applicable), if the curriculum vitae is not satisfactory;

has declared in writing any actual or potential conflict of interest;

has declared in writing that, in the last 10 years, they haven’t been convicted or subject to disciplinary action, and they have no charges or disciplinary action pending;

understands that they will be subject to a [insert months] probationary period as Responsible Manager.

The Compliance Manager will also:

confirm the references and qualifications of the prospective Responsible Manager by checking with the referees listed in the curriculum vitae;

ensure that the prospective Responsible Manager is aware of the scope of their authority; and

notify ASIC of the appointment within 10 business days. (You should use the “notifying ASIC of events” procedure found in Procedure 2).

[insert other requirements as appropriate]

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Working Document 15 - Annual training and development plan for RG 146 compliant representatives

[Please refer to 9.5 of the Procedures manual.]

Date of original planDate(s) plan updatedName of representativeBackgroundAuthorised representative or employee

Authorised representative / employee

Type of advice that can be provided

General / personal / both

Products in relation to which representative can provide adviceReview of past yearExtent to which objectives of last year’s training plan were metAssessment of performance over past yearAssessment of training and development requiredPoints required by professional associationAreas of training required in light of RG 146Gaps or weaknesses over past yearObjectives: knowledge skills performance otherTraining methodsNext reviewProposed date for next annual review

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Working Document 16 - Annual development plan for Responsible Managers [Please refer to 9.6 of the Procedures manual.]

Responsible Manager (insert name): xxxPeriod (insert dates): Plan prepared (insert date): Plan updated (insert date):

Product and industry knowledgeList financial services and products for which the Responsible Manager is responsible under the licence, and any associated or underlying asset types (e.g. property)

Item Areas covered Method Regularity Approx. dates (if applicable)

e.g. Financial Planning magazine

e.g. Various – as determined by editors

e.g. Reading and self-assessment

e.g. Quarterly

e.g. Oct 13, Jan 14, Apr 14 and Jul 14

e.g. Meeting with accountants

e.g. Superannuation

e.g. Discussion

e.g. Half-yearly

e.g. Aug 14 and Feb 15

Regulatory knowledgeFinancial services regulation and other regulation

Item Areas covered Method Regularity Approx. dates (if applicable)

e.g. Responsible Manager training, provided by Compact

e.g. Financial services regulation

e.g. Presentation, group discussion and workshop activities

e.g. Annually

e.g. Sep 13

e.g. AUSTRAC website self-assessment

e.g. Anti-money laundering and counter-terrorism financing

e.g. Self-assessment questionnaire

e.g. Annually

e.g. Sep 13

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Working Document 17 - Representative training register[Please refer to 9.7 of the Procedures manual.]

Representative name:Period of register:

Date Event Provider CPD points (if applicable)

Areas covered Duration Results Documentation attached

e.g. 18 Sep 13 e.g. Responsible Manager seminar

e.g. Compact – Compliance & Training

e.g. NA e.g. Responsible Manager obligations and liabilities, and licence obligations

e.g. Four hours (including breaks)

e.g. Successfully completed

e.g. Certificate of attendance

Total of CPD points (if applicable)

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Working Document 18 - Client File Checklist [Please refer to 10.3 of the Procedures Manual.]

Is the adviser authorised to provide this financial service? Yes/NoClient Contact details: [insert]

Client is Retail or Wholesale? Retail

Wholesale

Note: if Wholesale, proof of client is included on file (eg. proof that client controls more than $10 million) Yes No

Client ID: Client has been appropriately identified (ID documents on file)

Yes

No

FSGs Provided:

Include date and version

Date: ____________ Version: ____________

Date: ____________ Version: ____________

Risk Profile and discussion of risk is included on file:

Yes

No

Research/ Calculations used to arrive at recommendation is included on file:

Yes

No

Other Fact Finding notes are included on file: Yes

No

Written authorisation to keep tax file number (TFN) is on file:

Yes

No

Initial Advice -

SOA Provided:

Include date

Date: ____________

Authority to Proceed is on file: Yes

No

Further Advice –

SOA or ROA Provided:

Include date and document type, eg. SOA or ROA

Date: ____________ Document type: ____________



PDSs provided:

Include date, PDS product name Date: ____________ Product title: ___________

Application Forms: Appropriate product application forms are on file:

Yes

No

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Working Document 19 - Risk register [Please refer to 11.6 of the Procedures manual.]

Note: We have included an Excel Spread sheet which automates the process below, as a separate electronic file. It is far more efficient to use the Excel Spread sheet, titled “Risk Register [date]” than to use the table below.

STEP 1 STEP 2 STEP 3 STEP 4 STEP 5 STEP 6

RiskInherent risk (ignore controls)

Existing controlsExisting controls rating

Risk priority ratingLikelihood Consequences Rating

1. Not replacing a key person E.g. C E.g. 5 E.g. H E.g.: Succession plan for replacing

Key Person Quarterly health assessments

for current Key Person

E.g. 3 E.g. S

2. Not complying with our AFSL conditions

3. Not complying with the financial services laws

4. Not maintaining the competence of responsible managers

5. Not maintaining the competence of representatives

6. Not adequately supervising representatives

7. Insufficient human resources to carry out supervisory arrangements

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Risk Inherent risk (ignore controls) Existing controls Existing controls rating

Risk priority rating

Likelihood Consequences Rating8. Inadequate human resources to

provide financial services

9. Not maintaining adequate financial records

10. Insufficient financial resources to meet licence conditions

11. Inappropriate handling of clients’ money

12. Not notifying ASIC of a significant breach within 10 business days

13. Not providing our service efficiently due to lack of supervision of an outsourced IT contract

14. Inadequate technological resources

15. Computer system crashes 16. Not maintaining an internal

dispute resolution procedure and access to an external dispute resolution scheme

17. Inadequate or inappropriate information in promotional materials

18. Fire

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Risk Inherent risk (ignore controls) Existing controls Existing controls rating

Risk priority rating

Likelihood Consequences Rating19. Client takes legal action, alleging

they have been given inappropriate advice

20. Not providing financial services “efficiently”

21. Not providing financial services “honestly” or “fairly”

22. Not adequately managing conflicts of interest

23. Not adequately maintaining risk management systems

24. AML/CTF regulatory risk – not complying with our regulatory obligations under the AML/CTF Act

25. AML/CTF operational risk –unwittingly facilitating money laundering and/or terrorism financing

26. [Insert other risks, particularly those that adversely affect consumers or market integrity…]

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Working Document 20 - Risk Action Plan [Please refer to 11.7 of the Procedures Manual]

Risk #: Description of Risk:

Proposed Response and Outline of Benefits to be Gained from the Response

Specific Actions Responsible Person Time for Completion

Date for Review

Resources Required

Reporting and Monitoring

Complier: Date: Reviewer: Date:

Please also refer to “Risk Action Plan” tab in the Risk Register Excel Spreadsheet.

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Managing director & Compliance Manager & Responsible Manager

Personal assistant & office manager

Employee RepCorporate Authorised Rep

Employee Rep IT Accounting (outsourced)

Sub-Authorised Rep

Sub-Authorised Rep

Sub-Authorised Rep

Working Document 21 - Human resources checklist

[Please refer to 13.3 of the Procedures Manual].

The basic organisational structure of our business is: [insert description or attach diagram, eg]

The Compliance Manager has reviewed the human resource needs of ##, and determined that [insert description: “they are adequate” or “that 2 new employees need to be added by a X February 20XX”].

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Working Document 22 - Conflicts of interest register [Please refer to 14.4 of the Procedures Manual.]

All conflicts of interest relevant to ##’s business are included in the following register.

Conflicts which pose a substantial risk to ##’s AFSL obligations should also be included in ##’s Risk Management procedure.

Conflicts which have not been adequately managed should also be included in ##’s Breach Reporting procedure.

Conflict of interest & the service to which it

relatesImpact of conflict on

clientType of remedy or appropriate

response*Implementation date

E.g. Increased commission for investment product X in circumstance Y

Depends on client’s aversion to risk. Product X is a high-risk product

Ensure exact disclosure of commission is clear on SOA and FSG. Notify client Z of commission.

This register was last updated on [insert date] by [insert name] .

*There are 3 types of remedy or appropriate response: 1. Control2. Avoid3. Disclose

For example, an appropriate entry in the register may include some of the following: Requiring a representative to undertake further training or remedial action in

relation to providing appropriate advice (control) Declining to provide services to the particular client or group of clients (avoid) Disclosing the conflict of interest to a client or group of clients (disclose)

In addition, entries can also include other procedural responses, for example: Following the breach procedure, if it is discovered that a conflict existed and has

not been adequately managed (procedural) Notifying senior management (procedural)

Note: the Compliance Manager should communicate these remedies by the most appropriate and speedy method in the circumstances.

If the Responsible Person, when deciding what appropriate action to take where a conflict of interest arises, is significantly affected by the conflict, he/she will refer the task to [insert name of senior officer or partner or CEO/MD] .

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Working Document 23 - Warnings General Advice WarningsThere are two situations where you will need to give a general advice warning:

11. Verbally: When giving verbal general advice, (e.g. over the phone or at a seminar) all you need to say is:

This advice is general – it might not be appropriate to your situation.

12. In writing: When giving written general advice (eg. in a seminar presentation slide, a newsletter or website) you must be more detailed. You need to include the following wording:

“The information and any advice provided during the presentation has been prepared without taking into account your objectives, financial situation or needs. Because of that, you should, before acting on the advice, consider the appropriateness of the advice, having regard to those things.”

If you refer to a particular product, you must also say:

“You should also obtain a copy of and consider the Product Disclosure Statement for any financial product mentioned before making any decision.”

Incomplete or inaccurate information warningsIf you are giving personal advice and you know that the information provided by the client is incomplete or inaccurate, or if you just don’t ask enough questions and don’t know whether it’s complete or accurate, then you must give the following warning at the same time that the advice is provided, and in the same way (ie. written advice = written warning. Verbal advice = verbal warning.).

Our standard wording is:

[NOTE: Insert ABC Financial Services wording here, as per template, eg. “It is important that our advice is based on complete and accurate information relating to your personal circumstances [indicate the aspects that you feel are incomplete or inaccurate]. If you have not provided us with full and accurate information, you should consider the appropriateness of our advice to your circumstances before acting on it.”]

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