ASIC reminds managed discretionary account providers about new license requirements
From today, MDA providers without the required AFS licence authorisations must cease providing MDAs.
The Australian Securities & Investments Commission (ASIC) has reminded managed discretionary account (MDA) providers of their new license obligations that come into force today. In a notice, published on its website today, ASIC informs all managed discretionary account (MDA) providers must now have an Australian financial services (AFS) licence, with an MDA-specific ‘dealing by issue’ licence authorisation.
The new rules stipulate that, from today, MDA providers that do not have the required AFS licence authorisations have to stop providing MDAs until they have obtained those authorisations.
The regulator explains that 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 first informed market participants of the revised AFS licence requirements in September 2016. Since then, 59 AFS licensees have applied for authorisation to operate as an MDA provider to transition and there are 244 licensees who have an MDA specific ‘dealing by issue’ authorisation.
The Australian regulator says it will conduct reviews to check that MDA providers hold the relevant AFS licence authorisations and will take action if unlicensed activity is identified.
Let’s recall that, on September 29, 2016, ASIC updated its regulatory guidance on its relief for MDAs with the publication of revised Regulatory Guide 179 Managed discretionary accounts.
MDA providers that relied on ASIC’s no action position for MDAs operated on a regulated platform have had two years (that is, until today) to transition to the revised requirements and either obtain the necessary AFS licence authorisation or stop their MDA activities.