All managed discretionary account (MDA) providers must now have an Australian financial services (AFS) licence, with an MDA-specific ‘dealing by issue’ licence authorisation. From October 1st, MDA providers who do not have the required AFS licence authorisations must cease providing MDAs until they have obtained those authorisations. ASIC announced they will undertake reviews to check that MDA providers hold the relevant AFS licence authorisations and will take action if unlicensed activity is identified. Adam Turk, from Harbourside Capital has a brief rundown of the details here...
In September 2016 ASIC gave notice of revised AFS license requirements. In the recent ASIC media release on 1st October 2018, it stated that financial advisers that relied on ASIC’s no action position for MDAs operated on a regulated platform had two years to transition to the revised requirements and either obtain the necessary AFS licence authorisation or cease their MDA activities.
The misconception many financial advisers have is that these changes don’t affect them or it’s a “grey area”, as they recommend SMA’s or IMA’s for their clients. It’s not grey. It’s black and white. Both SMA’s and IMA’s come under MDA authorisation.
“An MDA is a facility where client portfolio assets are managed on an individual basis by an MDA provider at the MDA provider's discretion (subject to any limitation agreed with the client). MDAs are often used by financial advisers and varying terminology is used to refer to these products, such as separately managed accounts, individually managed accounts, investment advisory programs or managed discretionary portfolio services.” ASIC 18-292MR
If you have not applied for MDA authorisation on your AFSL and are recommending or dealing in MDA’s, IMA’s or SMA’s whether they are via a platform or not, you are in breach of ASIC’s MDA regulations.
Adam Turk is the Director of Harbourside Capital, which provides Accountants and Financial Planners with the ability to deliver tailored managed account solutions for the day to day management of client portfolios.
The ASIC Media release can be found here
NB - Since the publication of this article we have received several queries contesting the interpretation of ASIC 18-292MR as argued above, including the argument that the release applies to MDA Providers ie someone operating an MDA service rather than anyone advising on MDA’s. This interpretation argues that the regulations only apply to someone who is actually operating an MDA. Another contention was that it states that an MDA authorisation is required to recommend an SMA. It has been stated that if the SMA is a non-unitised managed investment scheme, as many are, then an MDA authorisation is not required.
Adviser Ratings is currently seeking clarification on these issues.