ASIC wants financial advisers to meet both the challenges of COVID-19 and the needs of their clients. Here’s what the regulator is focusing on.

As the COVID-19 pandemic continues to unfold, Australia’s corporate regulator has handed financial advisers several new protocols to better assist clients. These range from delaying regulatory reform to the scrutiny of capital markets.

The Australian Securities and Investments Commission (ASIC) has repeatedly revised and updated its priorities for 2020, as a result of the COVID19 pandemic and the resulting business disruption. These changes have significant implications for financial advisers and licensees across many areas, including regulatory reform, performance of capital markets, communication with clients, and professionalism and education. 

“ASIC has recognised the extraordinary demands placed on businesses and the broader community by COVID-19,” says ASIC Chair James Shipton. “Accordingly, ASIC has changed its regulatory priorities for the time being. This has meant the deferral of some activities and redeployment of staff so that we can address issues of immediate concern.”

Broadly, this has resulted in the regulator announcing a six-month delay of both the final implementation of the ‘best-interests’ duty for mortgage brokers and the new design and distribution obligations for financial products issuers.

Shipton says ASIC is also keeping a close eye on Australia’s equity and capital markets after a daily limit was imposed on ASX and Cboe equity trades following a huge volume spike in March.

“This action prevented delays in settlement that would have undermined investor confidence in the market and the wider economy at a critical and fragile time,” he says.

“We have now relaxed this requirement but continue to specifically monitor trading volumes, as well as the market more broadly.”

Key messages

The regulator is also looking to target consumers, both directly and via advisers, to get five key messages across:

• What to take into account if you are considering drawing on their superannuation and how best to go about doing so
• Guidance for consumers on making good decisions about loan repayments, including if they are considering a repayment deferral
• ‘Health warnings’ to retail shareholders on how to avoid being taken advantage of and what to be aware of when trading in volatile market conditions
• A recommendation that retail investors review and analyse their trading and investments if personal circumstances have changed as a result of the pandemic
• Warnings to consumers about misleading advertising of financial products that are made to seem safer than they really are.

ASIC also put the financial services industry on notice that despite the challenges posed by COVID-19, it expects entities to treat customers fairly, avoid adding further financial harm or burden to consumers, and act to maintain the integrity and efficiency of markets.

“In other words, we expect the industry to adopt a stance of utmost professionalism in everything that they do right now. For our part, we have written to lenders and insurers setting out our expectations,” says Shipton. “We did the same, together with APRA, for superannuation trustees. And, we also published FAQs for financial advisers.”

Timelines and deadlines

The FAQ outlines the measures ASIC has put in place both to assist consumers in accessing financial advice during the COVID-19 pandemic and assisting financial advisers in providing this crucial service.

Specifically, this relates to the early access of superannuation, extensions on the provision of a Statement of Advice (SOA) – 30 business days instead of five business days, and a Record of Advice (ROA) where the client expressly instructs the financial adviser that they require advice due to the economic effects of COVID-19.

Advisers should also be aware that these relief measures are temporary. Applications for the early release of superannuation expire on 24 September while most of the other relief measures will end on 15 October 2020, subject to further review.

Finally, the Senate passed a Bill in June to extend transitional timeframes for existing advisers to comply with education and training standards and to pass the FASEA exam. Advisers will now have until 1 January 2022, an additional year, to pass the FASEA exam. They will get an additional two years to meet FASEA's qualification requirements, with the new deadline for advisers to meet the education standards being 1 January 2026.

To assist advisers meet their CPD requirements, FASEA has granted advisers an additional three months to meet the 40-hour CPD requirement. This three-month extension is a one-off recognition of the difficulties faced by advisers this year.