FNSASIC302: RG245, SOA, Trailing Commissions, Risk Disclosure, Complaints Resolution, FDS, Insurance Brokers, EFT

This article covers the key elements of RG245 that AFS licensees and representatives must consider, legal basis and purpose of providing a statement of advice, legal and ethical issues surrounding the payment of trailing commissions, regulatory basis for risk disclosure, complaints resolution procedures, FDS guidelines, whether insurance brokers are required to issue SOA, regulatory code for businesses involved in EFT, and legal basis of non-cash payments.

F NS4081 5 C e r ti fi ca te I V in F I N AN C E & M O RT GA GE B RO K I N G
FN SA SIC 3 02 D e v e l op , p r e se nt and n e go ti ate c l i e nt so l u ti ons
Asse ssm e n t 1 - K n o wl e d ge

I d en t i fy and ex plain ke y elem ent s of R G24 5 t h a t A F S l i cen ce es and r ep r es ent a t i ves mus t con si d er w h en
e nte r ing i nto ongo ing f ee arr ange ments .
(Explain the legal environment including disclosure and compliance covering the role of the
representative or adviser).
Act i v it y 1 Answe r
While entering into fee arrangement with the client, AFS licensees must consider the following as per the
RG 245:
 What services will be provided to them.
 How the implementation will take place.
 Client's risk consideration and financial situation if changes took place therein.
 Regulation imposed by government in terms of social security, tax and superannuation.
 Provide and comply with the obligations pertaining to fee disclosure statement to indicate how
much they will charge.

Explain the legal basis and purpose of providing a statement of advice to a client.
(Explain the legal environment including disclosure and compliance covering relevant legal principles).
A c tiv i ty 2 A ns w er
The purpose of SOA are:
 To communicate relevant advisory information to the client to facilitate informed decision-
making.
 It provides for basis on which advice has been given, entity providing it and informing about all
the benefits and payment that the advisor will receive.

Explain the legal and ethical issues surrounding the payment of trailing commissions to finance and
mortgage brokers and advisers.
(Explain the legal environment including disclosure and compliance covering the relationship between ethics
and regulatory requirements).
Activity 3 Answer
Payment of trailing commissions sometime gave negative impact on the clients as the adviser or broker
may not be acting in the best interest of the client. From July 2013, the financial planners are no longer
allowed to receive any commissions from the product or service providers and also they are necessarily
required to disclose how relationship between them will work which includes charges and fees that
would be applicable for the services provided. The issue also involves the stoppage of payment for
services if they no longer needed it.

Identify and explain the regulatory basis for risk disclosure in the Australian financial planning industry.
(Name relevant industry codes of practice and conduct).
Activity 4 Answer
 Disclosure must be done with regard to risks in general way for the class of products and in
specific manner for a financial product.
 It should be done in simple terms that could be understood by an inexperienced investor as well.
 Explanations pertaining to risk should be done in dollar amounts instead of generic and
percentages terms.

Explain what a client should do if they have a complaint about a statement of advice. (Identify
complaints resolution procedures (internal and external).
Activity 5 Answer
At first, complaint should be done through internal dispute resolution. Also, complaint can be placed
with the professional body or industry association from which the advisor belongs to. At last, the
complaint can also be placed with AFCA to escalate the issue (Mulee, 2019).

RG 2 4 5 r e q uir e s F in an c ia l S er v i ce P r o vi d er s t o i ssue F ee D i scl osure S t a t emen t s (F D S ) t o cl i en t s wh o e nte r
i nto ongo ing f ee arr ange ments . How mu st a F S P pr o vi d e F DS s t o c l i ents ?
(Outline relevant ASIC regulatory guidelines).
Activity 6 Answer
 The statement must be related to the period of 12 months and to be provided to the client within
30 days of its disclosure.
 Must be in writing and provided through multiple channels by including the amount of fees to be
paid, services entitlements, etc.

Are insurance brokers required to issue a statement of advice to their clients? Explain your answer.
(Summarise the characteristics and participants of Australian insurance markets and the roles played by
intermediaries).
Activity 7 Answer
Yes, Insurance brokers needs to issue SOA if it is meant for the client. As per FSG, Client's needs,
financial objectives and situation must be ascertained by the broker along with considering and
investigating it in order to base their advice upon it (Alao, 2018). Further, SOA must include the
remuneration received by the broker in relation to the service provided.

What regulatory code must a business involved in EFT consider? (The
types of deposit products products).
Activity 8 Answer
EFT code of conduct supervised by ASIC is a self-regulatory code must be considered by the business
involved in EFT.

Explain the legal basis of the term ‘non-cash payments”.
(The types of non-cash payment products).
Activity 9 Answer
Within corporation act, FSR act 2001 has introduced the regulations pertaining to non-cash
payments. It involves payment that has not been done through exchanging foreign or Australian
currency physically and to provide services related to such NCP products, AFS license is necessary.

REFERENCES
Alao, A. A., 2018. Issues in Information Asymmetries and Financial Markets: A Review of
Literature. Journal of Accounting and Financial Management ISSN, 4(2), p.2018.
Mulee, M. M., 2019. Effect of Digital Financial Innovation on Economic Growth in Kenya (Doctoral
dissertation, University of Nairobi).